Category Archives: Economic Forecasts

Another Recession Probability Indicator – Updated Through Q4 2016

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of April 5, 2017, titled “Recession Probability Models – April 2017.”

While I don’t agree with the methodologies employed or the probabilities of impending economic weakness as depicted by these and other estimates, I do believe that the results of these models and estimates should be monitored.

Another probability of recession is provided by James Hamilton, and it is titled “GDP-Based Recession Indicator Index.”  A description of this index, as seen in FRED:

This index measures the probability that the U.S. economy was in a recession during the indicated quarter. It is based on a mathematical description of the way that recessions differ from expansions. The index corresponds to the probability (measured in percent) that the underlying true economic regime is one of recession based on the available data. Whereas the NBER business cycle dates are based on a subjective assessment of a variety of indicators that may not be released until several years after the event , this index is entirely mechanical, is based solely on currently available GDP data and is reported every quarter. Due to the possibility of data revisions and the challenges in accurately identifying the business cycle phase, the index is calculated for the quarter just preceding the most recently available GDP numbers. Once the index is calculated for that quarter, it is never subsequently revised. The value at every date was inferred using only data that were available one quarter after that date and as those data were reported at the time.

If the value of the index rises above 67% that is a historically reliable indicator that the economy has entered a recession. Once this threshold has been passed, if it falls below 33% that is a reliable indicator that the recession is over.

Additional reference sources for this index and its construction can be seen in the Econbrowser post of February 14, 2016 titled “Recession probabilities” as well as on the “The Econbrowser Recession Indicator Index” page.

Below is a chart depicting the most recent value of 8.4%, for the fourth quarter of 2016, last updated on April 28, 2017 (after the April 28, 2017 Gross Domestic Product Q1 2017 Advance Estimate (pdf)):

GDP-Based Recession Indicator Index

source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis on April 28, 2017:

https://research.stlouisfed.org/fred2/series/JHGDPBRINDX

_________

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 2384.20 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 April 20, 2017 update (reflecting data through April 14, 2017) is -1.309.

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 April 26, 2017 incorporating data from January 5,1973 through April 21, 2017, on a weekly basis.  The April 21, 2017 value is -.77:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 26, 2017:

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

The ANFCI chart below was last updated on April 26, 2017 incorporating data from January 5,1973 through April 21, 2017, on a weekly basis.  The April 21 value is -.20:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 26, 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 2393.47 as this post is written

Updates Of Economic Indicators April 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 April 2017 Chicago Fed National Activity Index (CFNAI) updated as of April 24, 2017:

The CFNAI, with current reading of .08:

CFNAI

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, April 24, 2017;

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

The CFNAI-MA3, with current reading of .03:

CFNAIMA3

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, April 24, 2017;

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

The ECRI WLI (Weekly Leading Index):

As of April 21, 2017 (incorporating data through April 14, 2017) the WLI was at 144.1 and the WLI, Gr. was at 6.5%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of April 21, 2017:

ECRI WLI,Gr. since 2000

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

Here is the latest chart, depicting the ADS Index from December 31, 2007 through April 15, 2017:

ADS Index

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

As per the April 20, 2017 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in March” (pdf) the LEI was at 126.7, the CEI was at 114.9, and the LAG was 123.6 in March.

An excerpt from the  release:

“The March increase and upward trend in the U.S. LEI point to continued economic growth in 2017, with perhaps an acceleration later in the year if consumer spending and investment pick up,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The gains among the leading indicators were very widespread, with new orders in manufacturing and the interest rate spread more than offsetting declines in the labor market components in March.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of April 20, 2017:

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 2374.76 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – April 21, 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 April 21, 2017 titled “ECRI Weekly Leading Index…”  These charts are on a weekly basis through the April 21, 2017 release, indicating data through April 14, 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 2350.64 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 April 13, 2017 update (reflecting data through April 7, 2017) is -1.369.

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 April 19, 2017 incorporating data from January 5,1973 through April 14, 2017, on a weekly basis.  The April 14, 2017 value is -.78:

NFCI

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

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

The ANFCI chart below was last updated on April 19, 2017 incorporating data from January 5,1973 through April 14, 2017, on a weekly basis.  The April 14 value is -.15:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 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 2343.58 as this post is written

April 2017 IMF Report – Probabilities Of Recession And Deflation

The International Monetary Fund (IMF) recently published the April 2017 “World Economic Outlook.” (pdf)  The subtitle is “Gaining Momentum?”

One area of the report is Figure 1.20 on page 29.  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 22% 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 blog 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 2343.51 this post is written

Deflation Probabilities – April 13, 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 2021.

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 April 13, 2017 update states the following:

The 2015–20 deflation probability was 1 percent on April 12, unchanged from April 5. The 2016–21 deflation probability was 1 percent on April 11—the first positive reading since January 17—but fell back to 0 percent on April 12. These 2015–20 and 2016–21 deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2015 and early 2016, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2015 and April 2016 and the 10-year TIPS issued in July 2010 and July 2011.

_________

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 2335.09 this post is written

The April 2017 Wall Street Journal Economic Forecast Survey

The April 2017 Wall Street Journal Economic Forecast Survey was published on April 13, 2017.  The headline is “Forecasters Lower Growth Outlook as Hopes for Quick Stimulus Fade.”

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:

A growing number of forecasters are beginning to reconsider their bullish outlook for the U.S. economy as doubts grow over the extent to which President Donald Trump will be able to implement his agenda.

also:

Growth forecasts for the first quarter have come down. In December, the average forecast called for 2.3% growth in the first quarter. That had fallen to 1.9% in March and dipped again to 1.4% in this month’s survey.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 15.79%. The individual estimates, of those who responded, ranged from 0% to 38%.  For reference, the average response in March’s survey was 14.41%.

As stated in the article, the survey’s respondents were 61 academic, financial and business economists.  Not every economist answered every question.  The survey occurred on April 7, 2017 to April 11, 2017.

The current average forecasts among economists polled include the following:

GDP:

full-year 2017:  2.3%

full-year 2018:  2.5%

full-year 2019:  2.1%

Unemployment Rate:

December 2017: 4.4%

December 2018: 4.3%

December 2019: 4.5%

10-Year Treasury Yield:

December 2017: 2.84%

December 2018: 3.32%

December 2019: 3.65%

CPI:

December 2017:  2.4%

December 2018:  2.4%

December 2019:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2017: $54.42

for 12/31/2018: $56.40

(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 2338.52 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 April 6, 2017 update (reflecting data through March 31, 2017) is -1.363.

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 April 12, 2017 incorporating data from January 5,1973 through April 7, 2017, on a weekly basis.  The April 7, 2017 value is -.78:

NFCI

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

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

The ANFCI chart below was last updated on April 12, 2017 incorporating data from January 5,1973 through April 7, 2017, on a weekly basis.  The April 7 value is -.16:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 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 blog 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 2344.33 as this post is written

CEO Confidence Surveys 1Q 2017 – Notable Excerpts

On April 6, 2017, The Conference Board released the 1st Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 68, up from 65 in the fourth quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this April 6 Press Release include:

CEOs’ assessment of current economic conditions improved further, with 71 percent saying conditions were better compared to six months ago, up from 59 percent in the final quarter of 2016. Business leaders were also considerably more positive in their assessment of current conditions in their own industries. Now, 60 percent state conditions in their own industries have improved versus 46 percent in the fourth quarter.

CEOs’ optimism regarding the short-term outlook for the economy eased slightly, but remains rather strong. Currently, 65 percent expect economic conditions to improve over the next six months, compared to approximately 67 percent last quarter. The outlook for their own industries, however, was more favorable, with 67 percent of CEOs anticipating an improvement over the next six months, up from 58 percent in the fourth quarter of 2016.

The Business Roundtable last month also released its CEO Economic Outlook Survey for the 1st Quarter of 2017.   Notable excerpts from the March 14, 2017 release, titled “Business Leaders Positive on Economy:  Expectations for Sales, Hiring & Investment Make Sharp Rise“:

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 — made its largest increase since the fourth quarter of 2009.

The Index jumped 19.1 points, from 74.2 in the fourth quarter of last year to 93.3 in the current quarter. For the first time in seven quarters, the Index has risen above its historical average of 79.8. Its highest level over the past 10 years was 113, reached in Q1 2011.

CEO plans for hiring increased by 18 points from the previous quarter, while expectations for sales and capital expenditures increased by 21 and 18.4 points, respectively, over the previous quarter.

CEOs project 2.2 percent GDP growth in 2017, a 0.2 percent increase over their projection for 2017 made last December.

_____

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 2359.47 as this post is written