Real Time Recession Indicator: 11.12.12
A real time recession indicator constructed from a composite of leading economic indicators, high frequency economic data, and SP500 pricing models continues to suggest that the US economy is NOT in recession.
This composite indicator utilizes data from the Economic Cycle Research Institute (WLI, LEI), the Philadelphia Federal Reserve (Aruoba-Diebold-Scotti Business Conditions Index), and the Chicago Federal Reserve (Chicago Fed National Activity Index). Furthermore, two SP500 price models (one proprietary and one not) are monitored. The data from the regional Federal Reserves and the ECRI continue to firm to the positive. In addition, the priced based models are far from confirming a recession. Although not in recession territory, growth isn’t exactly robust either as most measures are hugging the zero lines.
Figure 1 is a weekly chart of the SP500 with the composite Real Time Recession Indicator in the lower panel. With the indicator below the midline, the US economy is NOT in recession. Past and recent signals are shown. The 2011 signal turned out to be false and coincides with the launch of Operation Twist.
Figure 1. SP500/ weekly
Figure 2 feartures the ECRI’s WLI. The gray vertical lines highlight those times in the past 4 years the indicator was down two consecutive weeks (following a sustained thrust upward). As you can see, it has done a reasonable job at identifying market tops.
Figure 2. SP500/ monthly
Category: Economic
Guy,
The reports have been coming in, and you know, it’s a mixed bag with slowing momentum. The concern I have here is that expectations still seem way too high, and also, because top lines have come up short for the big guys, on the average, I would expect job cuts are next up. So, perhaps your indicator correctly indicates that we are not “in” recession, the data I’m seeing in reports on the whole, including guidance, is telling me to be very cautious here. Top lines are saying things are slowing, perhaps more quickly than many expect.
Thank you,
Phil