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 February 15, 2019 titled “ECRI Weekly Leading Index Update: All Measures Down WoW.” These charts are on a weekly basis through the February 15, 2019 release, indicating data through February 8, 2019.
This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:
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This last chart depicts, on a long-term basis, the WLI, Gr.:
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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
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 February 7, 2019 update (reflecting data through February 1, 2019) is -.991.
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:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on February 13, 2019 incorporating data from January 8, 1971 through February 8, 2019, on a weekly basis. The February 8 value is -.82:
The ANFCI chart below was last updated on February 13, 2019 incorporating data from January 8, 1971 through February 8, 2019, on a weekly basis. The February 8 value is -.61:
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
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 February 7, 2019 update states the following:
The 2018–23 deflation probability was 5 percent on February 6, down from 6 percent on January 30. The 2017–22 deflation probability was also 5 percent on February 6, down from 7 percent on January 30. 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.
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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
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:
In response to a separate question, most forecasters, 45.7%, said they expect the next recession to start in 2020, while 39.1% predicted it will start in 2021.
also:
More than three-quarters of forecasters, 76.4%, said they saw a greater risk that the economy would grow more slowly than it would grow faster. While that was a drop from 83.9% in January, it remains a sign of pessimism about the outlook. This time a year ago, fewer than 30% of respondents saw the risk to their growth forecast as tilted to the downside.
As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 24.53%. The individual estimates, of those who responded, ranged from 0% to 60%. For reference, the average response in January’s survey was 24.80%.
As stated in the article, the survey’s respondents were 62 academic, financial and business economists. Not every economist answered every question. The survey was conducted February 1 – February 5, 2019.
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The current average forecasts among economists polled include the following:
GDP:
full-year 2018: 3.0%
full-year 2019: 2.2%
full-year 2020: 1.7%
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: 3.04%
December 2020: 3.08%
December 2021: 3.11%
CPI:
December 2018: 2.00%
December 2019: 2.20%
December 2020: 2.20%
December 2021: 2.20%
Crude Oil ($ per bbl):
for 12/31/2019: $58.40
for 12/31/2020: $58.91
for 12/31/2021: $58.41
(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)
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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
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.
Currently (last updated February 4, 2019 using data through January) this “Yield Curve” model shows a 23.6219% probability of a recession in the United States twelve months ahead. For comparison purposes, it showed a 21.3459% probability through December, and a chart going back to 1960 is seen at the “Probability Of U.S. Recession Predicted by Treasury Spread.” (pdf)
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)
This model, last updated on January 2, 2019, [note: no update since then due to government data delay] currently shows a .8% probability using data through October.
Here is the FRED chart (last updated January 2, 2019):
Data Source: Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 9, 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 January 10, 2019 post titled “The January 2019 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 24.80% probability of a U.S. recession within the next 12 months.
_____
The Special Note summarizes my overall thoughts about our economic situation
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 January 31, 2019 update (reflecting data through January 25, 2019) is -.917.
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:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on February 6, 2019 incorporating data from January 8, 1971 through February 1, 2019, on a weekly basis. The February 1 value is -.78:
The ANFCI chart below was last updated on February 6, 2019 incorporating data from January 8, 1971 through February 1, 2019, on a weekly basis. The February 1 value is -.58:
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
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 January 24, 2019 update (reflecting data through January 18, 2019) is -.907.
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:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on January 30, 2019 incorporating data from January 8, 1971 through January 25, 2019, on a weekly basis. The January 25 value is -.81:
The ANFCI chart below was last updated on January 30, 2019 incorporating data from January 8, 1971 through January 25, 2019, on a weekly basis. The January 25 value is -.57:
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
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:
source: Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, January 28, 2019; https://fred.stlouisfed.org/series/CFNAI
The CFNAI-MA3, with current reading of .16:
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, January 28, 2019; https://fred.stlouisfed.org/series/CFNAIMA3
“The US LEI declined slightly in December and the recent moderation in the LEI suggests that the US economic growth rate may slow down this year,” said Ataman Ozyildirim, Director of Economic Research at The Conference Board. “While the effects of the government shutdown are not yet reflected here, the LEI suggests that the economy could decelerate towards 2 percent growth by the end of 2019.”
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
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 January 17, 2019 update (reflecting data through January 11, 2019) is -.841.
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:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on January 24, 2019 incorporating data from January 8, 1971 through January 18, 2019, on a weekly basis. The January 18 value is -.78:
The ANFCI chart below was last updated on January 24, 2019 incorporating data from January 8, 1971 through January 18, 2019, on a weekly basis. The January 18 value is -.58:
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
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 January 18, 2019 titled “ECRI Weekly Leading Index Update: YoY at 6+ Year Low.” These charts are on a weekly basis through the January 18, 2019 release, indicating data through January 11, 2019.
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.:
_________
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
