Category Archives: Economic Forecasts

Updates Of Economic Indicators October 2017

Here is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:

The October 2017 Chicago Fed National Activity Index (CFNAI) updated as of October 23, 2017:

The CFNAI, with current reading of .17:

CFNAI_10-23-17 .17

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, October 23, 2017;

https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with current reading of -.16:

CFNAI-MA3_10-23-17 -.16

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, October 23, 2017;

https://fred.stlouisfed.org/series/CFNAIMA3

The ECRI WLI (Weekly Leading Index):

As of October 20, 2017 (incorporating data through October 20, 2017) the WLI was at 146.6 and the WLI, Gr. was at 2.3%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of October 20, 2017:

ECRI WLI,Gr.

The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is the latest chart, depicting the ADS Index from December 31, 2007 through October 14, 2017:

ADS Index

The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):

As per the October 19, 2017 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Declined in September” (pdf) the LEI was at 128.6, the CEI was at 115.7, and the LAG was 125.2 in September.

An excerpt from the release:

“The US LEI declined slightly in September for the first time in the last twelve months, partly a result of the temporary impact of the recent hurricanes,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The source of weakness was concentrated in labor markets and residential construction, while the majority of the LEI components continued to contribute positively. Despite September’s decline, the trend in the US LEI remains consistent with continuing solid growth in the US economy for the second half of the year.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of October 19, 2017:

Conference Board Leading Economic Index

_________

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 2574.30 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 October 12, 2017 update (reflecting data through October 6, 2017) is -1.540.

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 October 18, 2017 incorporating data from January 8, 1971 through October 13, 2017, on a weekly basis.  The October 13, 2017 value is -.89:

NFCI_10-18-17 -.89

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 18, 2017:

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

The ANFCI chart below was last updated on October 18, 2017 incorporating data from January 8,1971 through October 13, 2017, on a weekly basis.  The October 13 value is -.67:

ANFCI_10-18-17 -.67

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 18, 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 2562.56 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – October 13, 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 October 13, 2017 titled “ECRI Weekly Leading Index…”  These charts are on a weekly basis through the October 13, 2017 release, indicating data through October 6, 2017.

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

ECRI WLI,Gr.

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 2556.32 as this post is written

The October 2017 Wall Street Journal Economic Forecast Survey

The October 2017 Wall Street Journal Economic Forecast Survey was published on October 12, 2017.  The headline is “Economists See GOP Tax Plan Producing Growth Spurt, But Split Over Long-Term Effect.”

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.

An excerpt:

An overwhelming majority of forecasters in The Wall Street Journal’s monthly survey of economists said the GOP tax plan unveiled last month would, if implemented, raise the growth rate for U.S. gross domestic product over the next two years. Some 60% saw a modest lift to output compared with its current trend, while 27% said the annual growth rate would jump by more than half a percentage point.

The announced framework, which lacks some details and could change as lawmakers flesh it out in the coming weeks, features lower tax rates on corporate profits, incentives for business investment and fewer individual income tax brackets, among other changes.

But roughly half of the economists said any growth spurt would fade over time. Asked about the tax plan’s likely effect on the economy’s long-run growth rate, 48% predicted a modest increase while 38% said the U.S. would remain on its current trajectory. Just 4% said the tax plan would boost the GDP growth rate by more than 0.5 percentage point a year, while 10% said growth would be slower than if there had been no tax changes.

also:

As for the federal budget deficit, 85% of economists said the GOP tax plan would cause it to widen over the next decade.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 15.85%. The individual estimates, of those who responded, ranged from 0% to 33%.  For reference, the average response in September’s survey was 16.08%.

As stated in the article, the survey’s respondents were 59 academic, financial and business economists.  Not every economist answered every question.  The survey was conducted October 6-10.

The current average forecasts among economists polled include the following:

GDP:

full-year 2017:  2.3%

full-year 2018:  2.4%

full-year 2019:  2.0%

Unemployment Rate:

December 2017: 4.2%

December 2018: 4.0%

December 2019: 4.1%

10-Year Treasury Yield:

December 2017: 2.46%

December 2018: 3.00%

December 2019: 3.30%

CPI:

December 2017:  1.8%

December 2018:  2.2%

December 2019:  2.4%

Crude Oil  ($ per bbl):

for 12/31/2017: $50.26

for 12/31/2018: $52.51

for 12/31/2019: $53.64

(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 2553.80 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 October 5, 2017 update (reflecting data through September 29, 2017) is -1.552.

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 October 12, 2017 incorporating data from January 8, 1971 through October 6, 2017, on a weekly basis.  The October 6, 2017 value is -.89:

NFCI

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

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

The ANFCI chart below was last updated on October 12, 2017 incorporating data from January 8,1971 through October 6, 2017, on a weekly basis.  The October 6 value is -.64:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 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 2554.82 as this post is written

October 2017 IMF Report – Probabilities Of Recession And Deflation

The International Monetary Fund (IMF) recently published the October 2017 “World Economic Outlook.”  The subtitle is ”Seeking Sustainable Growth:  Short-Term Recovery, Long-Term Challenges.”

One area of the report is Figure 1.19 on page 26.  While I do not agree with the current readings of the two measures presented – Probability of Recession and the Probability of Deflation – I do find them to be notable, especially as one can compare these estimates across various global economies.

As one can see, the report states that the U.S. is estimated to have a roughly 23% probability of recession and roughly a 2% probability of deflation for the periods indicated.

_________

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 2550.23 this post is written

CEO Confidence Surveys 3Q 2017 – Notable Excerpts

On October 5, 2017, The Conference Board released the 3rd Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 59, down from 61 in the second quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this October 5 Press Release include:

CEOs’ assessment of current economic conditions was mixed. Currently, 56 percent say conditions are better compared to six months ago, down from 60 percent in the second quarter. Business leaders, however, are more positive in their appraisal of current conditions in their own industries. Now, 53 percent say conditions in their own industries have improved, up from 47 percent last quarter.

Looking ahead, CEOs’ optimism regarding the short-term outlook for the economy is slightly more pessimistic. Currently, 39 percent expect economic conditions to improve over the next six months, compared to 41 percent last quarter. However, 14 percent expect economic conditions to worsen, compared to 3 percent last quarter. About 36 percent of CEOs anticipate an improvement in their own industries over the next six months, down from 48 percent in the second quarter of this year.

The Business Roundtable last month also released its CEO Economic Outlook Survey for the 3rd Quarter of 2017.   Notable excerpts from the September 19, 2017 release, titled “Business Roundtable CEO Economic Outlook Index Shows Signs of Continued Confidence in Economy“ (pdf):

The Business Roundtable CEO Economic Outlook Index — a composite of CEO projections for sales and plans for capital spending and hiring over the next six months — stood at 94.5 for the third quarter of 2017, edging up from 93.9 in the second quarter.

For the second quarter in a row, the Index reached its highest level since the second quarter of 2014 (95.4). The Index has also significantly exceeded its historical average of 80.3 for three quarters in a row and remains well above 50, suggesting CEOs’ continued confidence in the U.S. economy.

CEO plans for hiring jumped from the previous quarter, up 9.9 points to 80.2 in the third quarter – the highest reading in more than six years. Expectations for sales dipped by 7.4 to 116.9 for the third quarter, while plans for capital investment moderated slightly from 87.2 to 86.4.

CEOs project 2.1 percent GDP growth in 2017, up 0.1 percent from their projection for 2017 made in June.

_____

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 2546.60 as this post is written

Deflation Probabilities – October 5, 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 October 5, 2017 update states the following:

Both the 2017–22 deflation probability and the 2016–21 deflation probability were 3 percent over the September 27 to October 4 period.  These 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 2552.07 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 September 28, 2017 update (reflecting data through September 22, 2017) is -1.546.

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 October 4, 2017 incorporating data from January 5,1973 through September 29, 2017, on a weekly basis.  The September 29, 2017 value is -.86:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 4, 2017:

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

The ANFCI chart below was last updated on October 4, 2017 incorporating data from January 5,1973 through September 29, 2017, on a weekly basis.  The September 29 value is -.61:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 4, 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 2535.25 as this post is written

Recession Probability Models – October 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 October 2, 2017 using data through September) this “Yield Curve” model shows a 10.3271% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 9.9858% probability through August, 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 October 2, 2017, currently shows a .18% probability using data through July.

Here is the FRED chart (last updated October 2, 2017):

U.S. Recession Probability

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed October 2, 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 September 8 post titled “The September 2017 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 16.08% probability of a U.S. recession within the next 12 months.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2534.58 as this post is written