Category Archives: Economic Forecasts

Updates Of Economic Indicators April 2019

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 2019 Chicago Fed National Activity Index (CFNAI) updated as of April 22, 2019:

The CFNAI, with current reading of -.15:

CFNAI

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, April 22, 2019;
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with current reading of -.24:

CFNAIMA3

source:  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 22, 2019;
https://fred.stlouisfed.org/series/CFNAIMA3

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The ECRI WLI (Weekly Leading Index):

As of April 18, 2019 (incorporating data through April 12, 2019) the WLI was at 148.1 and the WLI, Gr. was at 1.2%.

A chart of the WLI,Gr., from the Doug Short’s site ECRI update post of April 18, 2019:

ECRI WLI,Gr.

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

Here is the latest chart, depicting the ADS Index from December 31, 2007 through April 13, 2019:

ADS Index

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

As per the April 18, 2019 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased” (pdf) the LEI was at 111.9, the CEI was at 105.8, and the LAG was 107.0 in March.

An excerpt from the release:

“The US LEI picked up in March with labor markets, consumers’ outlook, and financial conditions making the largest contributions,” said Ataman Ozyildirim, Director of Economic Research at The Conference Board. ”Despite the relatively large gain in March, the trend in the US LEI continues to moderate, suggesting that growth in the US economy is likely to decelerate toward its long term potential of about 2 percent by year end.”

Here is a chart of the LEI from the Doug Short’s site Conference Board Leading Economic Index update of April 18, 2019:

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 2902.89 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – April 18, 2019 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 the Doug Short site’s ECRI update post of April 18, 2019 titled “ECRI Weekly Leading Index Update:  WLI YoY Approaching Positive.”  These charts are on a weekly basis through the April 18, 2019 release, indicating data through April 12, 2019.

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

ECRI WLI

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

ECRI YoY of the Four-Week Moving Average

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

ECRI WLI,Gr. 1.2 Percent

_________

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 2905.03 as this post is written

Deflation Probabilities – April 18, 2019 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 2023.

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 18, 2019 update states the following:

The 2017–22 and 2018–23 deflation probabilities have remained at 0 percent through April 17 after falling from 5 percent to 0 percent on February 13 following the release of the Consumer Price Index (CPI) from the U.S. Bureau of Labor Statistics and the incorporation of revised seasonal adjustment factors for the CPI. These deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2017 and early 2018, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2017 and April 2018 and the 10-year TIPS issued in July 2012 and July 2013.

_________

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 2905.03 as this post is written

April 2019 Duke/CFO Global Business Outlook Survey – Notable Excerpts

On April 17, 2019 the April 2019 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 press release, I found the following to be the most notable excerpts – although I don’t necessarily agree with them:

Sixty-seven percent of U.S. CFOs believe that the U.S. will be in recession by the third quarter of 2020, and 84 percent believe that a recession will have begun by the first quarter of 2021. The survey found 38 percent of CFOs predicting recession by the first quarter of 2020.

also:

The survey asked the CFOs which economic variables will provide the most accurate indication that their own firms are experiencing a slow-down. Almost half (47 percent) of CFOs said they consider GDP growth to be one of the three most important indicators of their own firm’s fortunes. Consumer spending (39 percent), commodity prices (31 percent) and interest rates (29 percent) were also highly ranked indicators.

also:

CFOs expect their capital spending and revenue to increase by 5 percent over the next 12 months. CFOs predict hiring to increase by 2 percent and wages to grow by 3 percent.

The CFO survey contains two Optimism Index charts, with the bottom chart showing U.S. Optimism (with regard to the economy) at 65, as seen below:

Duke CFO Optimism chart

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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 2900.45 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 11, 2019 update (reflecting data through April 5, 2019) is -1.272.

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 17, 2019 incorporating data from January 8, 1971 through April 12, 2019, on a weekly basis.  The April 12 value is -.86:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 17, 2019: 
http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on April 17, 2019 incorporating data from January 8, 1971 through April 12, 2019, on a weekly basis.  The April 12 value is -.68:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 17, 2019: 
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 2907.06 as this post is written

The April 2019 Wall Street Journal Economic Forecast Survey

The April 2019 Wall Street Journal Economic Forecast Survey was published on April 11, 2019.  The headline is “Raising Minimum Wage Would Cost Jobs, Say Economists in WSJ Survey.”

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:

Nearly half of respondents expected the next recession to start in 2020, while 40% predicted the next downturn will start in 2021.

But the number of economists who say the economy could surprise them for the better nearly doubled to more than 22% in April from the prior month.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 25.80%. The individual estimates, of those who responded, ranged from 0% to 60%.  For reference, the average response in March’s survey was 24.51%.

As stated in the article, the survey’s respondents were 63 academic, financial and business economists.  Not every economist answered every question.  The survey was conducted April 5 – April 9, 2019.

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The current average forecasts among economists polled include the following:

GDP:

full-year 2018:  3.0%

full-year 2019:  2.1%

full-year 2020:  1.8%

full-year 2021:  1.8%

Unemployment Rate:

December 2019: 3.7%

December 2020: 3.8%

December 2021: 4.1%

10-Year Treasury Yield:

December 2019: 2.80%

December 2020: 2.83%

December 2021: 2.90%

CPI:

December 2019:  2.10%

December 2020:  2.10%

December 2021:  2.10%

Crude Oil  ($ per bbl):

for 12/31/2019: $61.94

for 12/31/2020: $60.48

for 12/31/2021: $60.73

(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 2884.03 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 4, 2019 update (reflecting data through March 29, 2019) is -1.226.

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 10, 2019 incorporating data from January 8, 1971 through April 5, 2019, on a weekly basis.  The April 5 value is -.84:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 10, 2019: 
http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on April 10, 2019 incorporating data from January 8, 1971 through April 5, 2019, on a weekly basis.  The April 5 value is -.67:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 10, 2019: 
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 2878.20 as this post is written

CEO Confidence Surveys 1Q 2019 – Notable Excerpts

On April 4, 2019, The Conference Board released the 1st Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 43, up from 42 in the fourth quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this April 4, 2019 Press Release include:

CEOs remain pessimistic about current economic conditions, with just 14 percent saying conditions are better compared to six months ago, down from 21 percent last quarter. Meanwhile, about 46 percent say conditions are worse, up from 39 percent in Q4 2018. CEOs were also more negative about current conditions in their own industries compared to six months ago. Currently, just 12 percent say conditions are better, down from 21 percent last quarter. However, those who say conditions have worsened rose moderately, from 35 percent last quarter to 37 percent.

Looking ahead, CEOs’ expectations regarding the economic outlook have improved slightly from last quarter. Some 14 percent now expect economic conditions to improve over the next six months, up from 12 percent in the fourth quarter. Meanwhile, about 42 percent expect economic conditions will worsen, down from 52 percent last quarter. CEOs’ expectations regarding short-term prospects in their own industries over the next six months were also moderately less pessimistic. Now, 19 percent anticipate an improvement in conditions, up from 14 percent last quarter. Moreover, 37 percent expect conditions will worsen, down from 44 percent in the fourth quarter.

Last month, the Business Roundtable also released its CEO Economic Outlook Survey for the 1st Quarter of 2019.   Notable excerpts from the March 19 release, titled “Business Roundtable CEO Economic Outlook Index Softens, Remains Above Historical Average“:

The CEO Economic Outlook Index decreased to 95.2 in the first quarter of 2019, a decrease of 9.2 points from the previous quarter. Despite this decrease, the Index surpassed its historical average of 82.4. This marks the ninth consecutive quarter where the Index has exceeded the historical average, signaling a continued positive direction for the U.S. economy.

also:

In their second estimate of 2019 U.S. GDP growth, CEOs projected 2.5 percent growth for the year, down from their 2.7 percent estimate in the previous quarter.

Additional details can be seen in the sources mentioned above.

_____

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 2895.77 as this post is written

Recession Probability Models – April 2019

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 April 2, 2019 using data through March) this “Yield Curve” model shows a 27.0796% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 24.6188% probability through February, 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 29, 2019 currently shows a 3.32% probability using data through February.

Here is the FRED chart (last updated March 29, 2019):

Smoothed U.S. Recession Probabilities

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed April 6, 2019: 
http://research.stlouisfed.org/fred2/series/RECPROUSM156N

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The two models featured above can be compared against measures seen in recent posts.  For instance, as seen in the March 14, 2019 post titled “The March 2019 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 24.51% probability of a U.S. recession within the next 12 months.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2892.74 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 28, 2019 update (reflecting data through March 22, 2019) is -1.283.

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 3, 2019 incorporating data from January 8, 1971 through March 29, 2019, on a weekly basis.  The March 29 value is -.85:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 3, 2019: 
http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on April 3, 2019 incorporating data from January 8, 1971 through March 29, 2019, on a weekly basis.  The March 29 value is -.69:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 3, 2019: 
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 2879.78 as this post is written