Category Archives: Economic Forecasts

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – February 24, 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 February 24, 2017 titled “ECRI Weekly Leading Index…”  These charts are on a weekly basis through the February 24, 2017 release, indicating data through February 17, 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:

ECRI WLI YoY of the Four-Week Moving Average

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 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 2358.29 as this post is written

Updates Of Economic Indicators February 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 February 2017 Chicago Fed National Activity Index (CFNAI) updated as of February 23, 2017: (current reading of CFNAI is -.05; current reading of CFNAI-MA3 is -.03):

CFNAI

The ECRI WLI (Weekly Leading Index):

As of February 17, 2017 (incorporating data through February 10, 2017) the WLI was at 144.5 and the WLI, Gr. was at 11.1%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of February 17, 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 February 18, 2017:

ADS Index

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

As per the February 17, 2017 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in January” (pdf) the LEI was at 125.5, the CEI was at 114.4, and the LAG was 123.7 in January.

An excerpt from the  release:

“The U.S. Leading Economic Index increased sharply again in January, pointing to a positive economic outlook in the first half of this year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The January gain was broad based among the leading indicators. If this trend continues, the U.S. economy may even accelerate in the near term.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of February 17, 2017:

Conference Board LEI

_________

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 2361.38 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 February 23, 2017 update (reflecting data through February 17, 2017) is -1.274.

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 February 23, 2017 incorporating data from January 5,1973 through February 17, 2017, on a weekly basis.  The February 17, 2017 value is -.83:

NFCI_2-23-17

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 23, 2017:

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

The ANFCI chart below was last updated on February 23, 2017 incorporating data from January 5,1973 through February 17, 2017, on a weekly basis.  The February 17 value is -.14:

ANFCI_2-23-17

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 23, 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 2365.28 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 February 9, 2017 update (reflecting data through February 3, 2017) is -1.211.

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 February 15, 2017 incorporating data from January 5,1973 through February 10, 2017, on a weekly basis.  The February 10, 2017 value is -.82:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 15, 2017:

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

The ANFCI chart below was last updated on February 15, 2017 incorporating data from January 5,1973 through February 10, 2017, on a weekly basis.  The February 10 value is -.18:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 15, 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 2341.50 as this post is written

Philadelphia Fed – 1st Quarter 2017 Survey Of Professional Forecasters

The Philadelphia Fed 1st Quarter 2017 Survey of Professional Forecasters was released on February 10, 2017.  This survey is somewhat unique in various regards, such as it incorporates a longer time frame for various measures.

The survey shows, among many measures, the following median expectations:

Real GDP: (annual average level)

full-year 2017:  2.3%

full-year 2018:  2.4%

full-year 2019:  2.6%

full-year 2020:  2.1%

Unemployment Rate: (annual average level)

for 2017: 4.6%

for 2018: 4.5%

for 2019: 4.5%

for 2020: 4.6%

Regarding the risk of a negative quarter in real GDP in any of the next few quarters, mean estimates are 7.7%, 11.2%, 14.6%, 16.2% and 17.7% for each of the quarters from Q1 2017 through Q1 2018, respectively.

As well, there are also a variety of time frames shown (present quarter through the year 2026) with the median expected inflation (annualized) of each.  Inflation is measured in Headline and Core CPI and Headline and Core PCE.  Over all time frames expectations are shown to be in the 1.8% to 2.5% range.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not 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 2317.66 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – February 10, 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 February 10, 2017 titled “ECRI Weekly Leading Index: Another All-Time High.”  These charts are on a weekly basis through the February 10, 2017 release, indicating data through February 3, 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 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 2317.11 as this post is written

Deflation Probabilities – February 9, 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 February 9, 2017 update states the following:

The 2015–20 and 2016–21 deflation probabilities have remained at 0 percent since November 3 and January 17, respectively. 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. We will continue updating the deflation probabilities file and chart weekly but will discontinue social media and update alerts until probabilities move above 0 percent.

_________

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 2307.87 this post is written

The February 2017 Wall Street Journal Economic Forecast Survey

The February 2017 Wall Street Journal Economic Forecast Survey was published on February 9, 2017.  The headline is “Forecasters See Slow Progress in Labor-Market Measures Favored by Trump Administration.”

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:

Mr. Mnuchin also mentioned the U-6 rate, which includes the discouraged workers mentioned above and people who have part-time jobs but want full-time work.

This is the Labor Department’s broadest measure of unemployment, which stood at 9.4% in January. Over the next three years it is expected to decline to 8.7%, according to the average forecast. If correct, that, too, would be higher than the rate seen in previous booms.

also:

The survey respondents expect labor-force participation to rise to 63.3% by the end of 2019. The overall population will also grow over this period, according to Census Bureau projections (which already assume that immigration will slow), and so the number of people outside the labor force would likely remain around 95 million.

As stated in the article, the survey’s respondents were 62 academic, financial and business economists.  Not every economist answered every question.  The survey occurred on February 3, 2017 to February 7, 2017.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 15.09%. The individual estimates, of those who responded, ranged from 0% to 33%.  For reference, the average response in January’s survey was 16.49%.

The current average forecasts among economists polled include the following:

GDP:

full-year 2016:  1.9%

full-year 2017:  2.4%

full-year 2018:  2.5%

full-year 2019:  2.1%

Unemployment Rate:

December 2017: 4.5%

December 2018: 4.4%

December 2019: 4.5%

10-Year Treasury Yield:

December 2017: 2.86%

December 2018: 3.31%

CPI:

December 2017:  2.3%

December 2018:  2.4%

Crude Oil  ($ per bbl):

for 12/31/2017: $55.79

for 12/31/2018: $59.17

(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 blog 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 2308.81 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 February 2, 2017 update (reflecting data through January 27, 2017) is -1.21.

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 February 8, 2017 incorporating data from January 5,1973 through February 3, 2017, on a weekly basis.  The February 3, 2017 value is -.80:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 8, 2017:

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

The ANFCI chart below was last updated on February 8, 2017 incorporating data from January 5,1973 through February 3, 2017, on a weekly basis.  The February 3 value is -.18:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 8, 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 2294.02 as this post is written

Recession Probability Models – February 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 February 2, 2017 using data through January) this “Yield Curve” model shows a 4.0601% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 3.7396% probability through December, 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 February 1, 2017, currently shows a 2.84% probability using data through November.

Here is the FRED chart (last updated February 1, 2017):

U.S. Recession Probability model

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed February 6, 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 January 12 post titled “The January 2017 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 16.49% probability of a U.S. recession within the next 12 months.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2292.56 as this post is written