Category Archives: Economic Forecasts

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the July 13, 2017 update (reflecting data through July 7, 2017) is -1.475.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on July 19, 2017 incorporating data from January 5,1973 through July 14, 2017, on a weekly basis.  The July 14, 2017 value is -.90:

NFCI_7-19-17

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 19, 2017:

http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on July 19, 2017 incorporating data from January 5,1973 through July 14, 2017, on a weekly basis.  The July 14 value is -.20:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 19, 2017:

http://research.stlouisfed.org/fred2/series/ANFCI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2473.83 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – July 14, 2017 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from Doug Short’s ECRI update post of July 14, 2017 titled “ECRI Weekly Leading Index…”  These charts are on a weekly basis through the July 14, 2017 release, indicating data through July 7, 2017.

Here is the ECRI WLI (defined at ECRI’s glossary):

ECRI WLI

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

This last chart depicts, on a long-term basis, the WLI, Gr.:

ECRI WLI,Gr.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2459.27 as this post is written

The July 2017 Wall Street Journal Economic Forecast Survey

The July 2017 Wall Street Journal Economic Forecast Survey was published on July 13, 2017.  The headline is “Forecasters Lower Economic Outlook Amid Congressional Gridlock.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the “Economist Q&A” section.

Two excerpts:

Forecasters in The Wall Street Journal’s monthly survey of economists marked down their outlooks for growth, inflation and interest rates this month, a partial reversal of a postelection bump.

also:

Forecasters assess whether they think the economy is more likely to outperform or underperform their forecasts. The number of economists seeing those risks to the downside climbed to 57% in this month’s survey, the highest since before the election. That’s up from 51% last month and 37% just two months ago.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 14.78%. The individual estimates, of those who responded, ranged from 0% to 33%.  For reference, the average response in June’s survey was 15.80%.

As stated in the article, the survey’s respondents were 63 academic, financial and business economists.  Not every economist answered every question.  The survey occurred on July 7, 2017 to July 11, 2017.

The current average forecasts among economists polled include the following:

GDP:

full-year 2017:  2.3%

full-year 2018:  2.4%

full-year 2019:  1.9%

Unemployment Rate:

December 2017: 4.3%

December 2018: 4.1%

December 2019: 4.3%

10-Year Treasury Yield:

December 2017: 2.65%

December 2018: 3.12%

December 2019: 3.39%

CPI:

December 2017:  1.8%

December 2018:  2.3%

December 2019:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2017: $47.45

for 12/31/2018: $51.16

for 12/31/2019: $51.99

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2448.24 as post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the July 6, 2017 update (reflecting data through June 30, 2017) is -1.505.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on July 12, 2017 incorporating data from January 5,1973 through July 7, 2017, on a weekly basis.  The July 7, 2017 value is -.88:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 12, 2017:

http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on July 12, 2017 incorporating data from January 5,1973 through July 7, 2017, on a weekly basis.  The July 7 value is -.24:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 12, 2017:

http://research.stlouisfed.org/fred2/series/ANFCI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2441.28 as this post is written

CEO Confidence Surveys 2Q 2017 – Notable Excerpts

On July 6, 2017, The Conference Board released the 2nd Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 61, down from 68 in the first quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this July 6 Press Release include:

CEOs’ appraisal of current economic conditions waned, with 60 percent saying conditions were better compared to six months ago, down from 71 percent in the first quarter. Business leaders were also less positive in their appraisal of current conditions in their own industries. Now, just 47 percent say conditions in their own industries have improved, down from 60 percent last quarter.

Looking ahead, CEOs’ optimism regarding the short-term outlook for the economy moderated due to a greater percentage expressing a “more of the same” sentiment as opposed to foreseeing conditions worsening. Currently, 41 percent expect economic conditions to improve over the next six months, compared to approximately 65 percent last quarter. The outlook for their own industries was also less favorable, with 48 percent of CEOs anticipating an improvement over the next six months, down from 67 percent in the first quarter of this year.

The Business Roundtable last month also released its CEO Economic Outlook Survey for the 2nd Quarter of 2017.   Notable excerpts from the June 6, 2017 release, titled “Survey:  America’s Business Leaders Maintaining Confidence in U.S. Economy“:

The Business Roundtable CEO Economic Outlook Index — a composite of CEO
plans for capital spending and hiring and projections for sales over the next six months —
reached its highest level in three years, since the second quarter of 2014 (95.4). The Index
stood at 93.9 in the second quarter of 2017, up from 93.3 in the first quarter. For the
second quarter in a row, the Index stands well above its historical average of 80.0.

CEO plans for capital investment rose by 4.6 points from the last quarter, while
expectations for sales stayed steady, increasing by 0.5 point. Plans for hiring for the next
six months dropped a modest 3.3 points.

CEOs project 2.0 percent GDP growth in 2017, down two-tenths from their projection for
2017 made in March.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2427.43 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the July 6, 2017 update (reflecting data through June 30, 2017) is -1.505.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on July 6, 2017 incorporating data from January 5,1973 through June 30, 2017, on a weekly basis.  The June 30, 2017 value is -.87:

NFCI_7-6-17

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 6, 2017:

http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on July 6, 2017 incorporating data from January 5,1973 through June 30, 2017, on a weekly basis.  The June 30 value is -.21:

ANFCI_7-6-17

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 6, 2017:

http://research.stlouisfed.org/fred2/series/ANFCI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2409.75 as this post is written

Deflation Probabilities – July 6, 2017 Update

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”

As stated on the site:

Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2022.

A chart shows the trends of the probabilities.  As one can see in the chart, the readings are volatile.

As for the current weekly reading, the July 6, 2017 update states the following:

The 2017–22 deflation probability was 6 percent on July 5, unchanged from June 28. The 2016–21 deflation probability was 0 percent on July 5, also unchanged from June 28. These 2016–21 and 2017–22 deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2016 and early 2017, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2016 and April 2017 and the 10-year TIPS issued in July 2011 and July 2012.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2409.75 this post is written

Recession Probability Models – July 2017

There are a variety of economic models that are supposed to predict the probabilities of recession.

While I don’t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.

Please note that each of these models is updated regularly, and the results of these – as well as other recession models – can fluctuate significantly.

The first is the “Yield Curve as a Leading Indicator” from the New York Federal Reserve.  I wrote a post concerning this measure on March 1, 2010, titled “The Yield Curve as a Leading Indicator.”

Currently (last updated July 5, 2017 using data through June) this “Yield Curve” model shows a 9.869% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 7.8283% probability through May, and a chart going back to 1960 is seen at the “Probability Of U.S. Recession Predicted by Treasury Spread.” (pdf)

The second model is from Marcelle Chauvet and Jeremy Piger.  This model is described on the St. Louis Federal Reserve site (FRED) as follows:

Smoothed recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. This model was originally developed in Chauvet, M., “An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching,” International Economic Review, 1998, 39, 969-996. (http://faculty.ucr.edu/~chauvet/ier.pdf)

Additional details and explanations can be seen on the “U.S. Recession Probabilities” page.

This model, last updated on July 3, 2017, currently shows a .24% probability using data through April.

Here is the FRED chart (last updated July 3, 2017):

RECPROUSM156N

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed July 5, 2017:

http://research.stlouisfed.org/fred2/series/RECPROUSM156N

The two models featured above can be compared against measures seen in recent blog posts.  For instance, as seen in the June 9 post titled “The June 2017 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 15.80% probability of a U.S. recession within the next 12 months.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2432.54 as this post is written

June 2017 Duke/CFO Global Business Outlook Survey – Notable Excerpts

On June 13, 2017 the June Duke/CFO Global Business Outlook was released.  It contains a variety of statistics regarding how CFOs view business and economic conditions.

In this CFO survey, I found the following to be the most notable excerpts – although I don’t necessarily agree with them:

Uncertainty about regulatory policy and health care costs is causing chief financial officers in the United States to hold back investment plans, a new survey finds.

also:

The survey has been conducted for 85 consecutive quarters and spans the globe, making it the world’s longest-running and most comprehensive research on senior finance executives. This quarter, nearly 750 CFOs responded to the survey, which ended June 9. Results are for the U.S. unless stated otherwise.

Almost 40 percent of CFOs indicated uncertainty is currently higher than normal. Among those companies, about 60 percent said that uncertainty has caused them to delay new projects and investments.

also:

The Optimism Index fell slightly this quarter to 67 on a 100-point scale. That’s two points lower than last quarter but still far above the long-run average of 60.

“CFOs remain optimistic not only about the overall economy but about their own firms too,” Graham said. “Our analysis of past results shows the CFO Optimism Index is an excellent predictor of the future, especially hiring plans and overall GDP growth.”

Hiring plans are stronger than one year ago and U.S. companies expect to pay higher wages, with median wage growth of about 3 percent over the next 12 months, even greater in the construction and tech industries.

The CFO survey contains two Optimism Index charts, with the bottom chart showing U.S. Optimism (with regard to the economy) at 67, as seen below:

Duke CFO Survey Optimism chart

It should be interesting to see how well the CFOs predict business and economic conditions going forward.   I discussed past various aspects of this, and the importance of these predictions, in the July 9, 2010 post titled “The Business Environment”.

(past posts on CEO and CFO surveys can be found under the “CFO and CEO Confidence” tag)

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2428.11 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the June 22, 2017 update (reflecting data through June 16, 2017) is -1.565.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on June 28, 2017 incorporating data from January 5,1973 through June 23, 2017, on a weekly basis.  The June 23, 2017 value is -.89:

NFCI_6-28-17_-.89

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed June 28, 2017:

http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on June 28, 2017 incorporating data from January 5,1973 through June 23, 2017, on a weekly basis.  The June 23 value is -.36:

ANFCI_6-28-17 -.36

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed June 28, 2017:

http://research.stlouisfed.org/fred2/series/ANFCI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2440.69 as this post is written