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 March 22, 2018 update (reflecting data through March 16, 2018) is -1.116.

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 March 28, 2018 incorporating data from January 8, 1971 through March 23, 2018, on a weekly basis.  The March 23, 2018 value is -.77:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 28, 2018:

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

The ANFCI chart below was last updated on March 28, 2018 incorporating data from January 8,1971 through March 23, 2018, on a weekly basis.  The March 23 value is -.50:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 28, 2018:

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 2612.62 as this post is written

Updates Of Economic Indicators March 2018

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 March 2018 Chicago Fed National Activity Index (CFNAI) updated as of March 26, 2018:

The CFNAI, with current reading of .88:

CFNAI_3-26-18 .88

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, March 26, 2018;

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

The CFNAI-MA3, with current reading of .37:

CFNAIMA3_3-26-18 .37

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, March 26, 2018;

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

The ECRI WLI (Weekly Leading Index):

As of March 23, 2018 (incorporating data through March 16, 2018) the WLI was at 149.5 and the WLI, Gr. was at 5.5%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of March 26, 2018:

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 March 17, 2018:

ADS Index

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

As per the March 22, 2018 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in February” (pdf) the LEI was at 108.7, the CEI was at 103.3, and the LAG was 104.3 in February.

An excerpt from the release:

“The U.S. LEI rose again, despite a sharp downturn in stock markets and weakness in housing construction in February,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The LEI points to robust economic growth throughout 2018. Its six-month growth rate has not been this high since the first quarter of 2011. While the Federal Reserve is on track to continue raising its benchmark rate for the rest of the year, the recent weakness in residential construction and stock prices – important leading indicators – should be monitored closely.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of March 22, 2018:

Conference Board LEI

_________

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 2641.88 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 March 15, 2018 update (reflecting data through March 9, 2018) is -1.108.

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 March 21, 2018 incorporating data from January 8, 1971 through March 16, 2018, on a weekly basis.  The March 16, 2018 value is -.78:

NFCI_3-21-18 -.78

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 21, 2018:

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

The ANFCI chart below was last updated on March 21, 2018 incorporating data from January 8,1971 through March 16, 2018, on a weekly basis.  The March 16 value is -.55:

ANFCI_3-21-18 -.55

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 21, 2018:

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 2714.61 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – March 16, 2018 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 March 16, 2018 titled “ECRI Weekly Leading Index.”  These charts are on a weekly basis through the March 16, 2018 release, indicating data through March 9, 2018.

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 2753.23 as this post is written

The March 2018 Wall Street Journal Economic Forecast Survey

The March 2018 Wall Street Journal Economic Forecast Survey was published on March 15, 2018.  The headline is “WSJ Survey:  Economists See Steeper Fed Rate Path, Stronger Inflation.”

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:

The economy grew 2.5% in the fourth quarter from a year earlier, well above the postrecession annual average of 1.9%.

Economists in the latest survey saw annual inflation rising to 2.1% in the fourth quarter of 2018 and remaining relatively stable thereafter.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 13.66%. The individual estimates, of those who responded, ranged from 0% to 35%.  For reference, the average response in February’s survey was 13.97%.

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 March 9 – March 13, 2018.

The current average forecasts among economists polled include the following:

GDP:

full-year 2018:  2.9%

full-year 2019:  2.4%

full-year 2020:  1.9%

Unemployment Rate:

December 2018: 3.7%

December 2019: 3.7%

December 2020: 4.0%

10-Year Treasury Yield:

December 2018: 3.23%

December 2019: 3.47%

December 2020: 3.58%

CPI:

December 2018:  2.3%

December 2019:  2.3%

December 2020:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2018: $60.98

for 12/31/2019: $59.56

for 12/31/2020: $59.25

(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 2746.74 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 March 8, 2018 update (reflecting data through March 2, 2018) is -1.112.

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 March 14, 2018 incorporating data from January 8, 1971 through March 9, 2018, on a weekly basis.  The March 9, 2018 value is -.77:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 14, 2018:

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

The ANFCI chart below was last updated on March 14, 2018 incorporating data from January 8,1971 through March 9, 2018, on a weekly basis.  The March 9 value is -.56:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 14, 2018:

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 2749.48 as this post is written

Deflation Probabilities – March 8, 2018 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 March 8, 2018 update states the following:

The 2017–22 deflation probability has been 0 percent since December 18, 2017. The 2016–21 deflation probability was 0 percent on March 7, down from 1 percent on February 28. 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 2738.97 as this post is written

March 2018 Duke/CFO Global Business Outlook Survey – Notable Excerpts

On March 7, 2018 the March 2018 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:

Forty-four percent of U.S. companies plan to increase wages more than they would have without tax reform. Thirty-eight percent plan to increase employment and 36 percent will increase domestic investment. Thirty-one percent will increase cash holdings. Among companies with defined benefit pensions, 28 percent will increase pension contributions.

also:

Due to tax reform, the effective (or average) tax rate for U.S. companies is expected to fall by about 5 percent, from 24 percent to 18.8 percent.

also:

The Optimism Index in the U.S. increased to 71 on a 100-point scale this quarter, an all-time high.

“The extremely high level of business optimism is tied to the recently passed corporate tax reform,” Graham said. “Our analysis of past results shows the CFO Optimism Index is an accurate predictor of future economic growth and hiring, therefore 2018 looks to be a very promising year.”

Optimism is up around the world, anticipating strong global economic conditions.

also:

The proportion of firms indicating they are having difficulty hiring and retaining qualified employees remains at a two-decade high, with 45 percent of CFOs calling it a top concern, up from 43 percent last quarter. The median U.S. firm says it plans to increase employment by a median 3 percent in 2018.

“The tight labor market continues to put upward pressure on wages,” said Chris Schmidt, senior editor at CFO Research. “Wage inflation is now listed near the top half dozen concerns of U.S. CFOs.”

The CFO survey contains two Optimism Index charts, with the bottom chart showing U.S. Optimism (with regard to the economy) at 71, 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 2735.50 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 March 1, 2018 update (reflecting data through February 23, 2018) is -1.174.

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 March 7, 2018 incorporating data from January 8, 1971 through March 2, 2018, on a weekly basis.  The March 2, 2018 value is -.77:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 7, 2018:

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

The ANFCI chart below was last updated on March 7, 2018 incorporating data from January 8,1971 through March 2, 2018, on a weekly basis.  The March 2 value is -.56:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 7, 2018:

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 2704.18 as this post is written

Recession Probability Models – March 2018

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 March 6, 2018 using data through February) this “Yield Curve” model shows a 9.1421% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 10.4146% probability through January, 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 March 5, 2018, currently shows a .28% probability using data through December.

Here is the FRED chart (last updated March 5, 2018):

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 March 7, 2018:

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 February 8 post titled “The February 2018 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 13.97% probability of a U.S. recession within the next 12 months.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2712.16 as this post is written