World and US Recession Indicators

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Latest Recession Indicators

This page is for tracking Leading and Coincident Recession Indicators.

There will be some additional focus paid to U.S. recession indicators but the entire world will be included, as we are all part of ONE WORLD.

Econbrowser US Recession Indicators‘s Probability of Recession Model ( James D. Hamilton is Professor of Economics at the University of California, San Diego and Menzie Chinn is Professor of Public Affairs and Economics at the University of Wisconsin, Madison) suggests that recession odds for a US recession in 2020 are high (graph below) US Recession Odds within 12 months

Conference Board Leading Economic Index

We find the Conference Board‘s LEI a useful but wanting index for use as far as Recession Indicators go. This is because, while a very good index, the CLEI has a history of some significant revisions that, while ‘fixing’ prior booboos, leave a bit of wanting for a more timely series. Nonetheless, it is one of the most watched by investors, eggheads and policy makers.

Conference Board recession indicators
Conference Board U.S. Leading Economic Indicator and U.S. Coincident Economic Indicator for the Month Ending in January 2020 and released on February 20, 2020

 February 20, 2020…The Conference Board Leading Economic Index®(LEI)for the U.S.increased 0.8 percent in January to 112.1 (2016= 100), following a 0.3percent decline in December and a 0.1 percent increase in November.

“The US LEI declined slightly in December, driven by large negative contributions from rising unemployment insurance claims and a drop in housing permits,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The LEI has now declined in four out of the last five months. Its six-month growth rate turned slightly more negative in the final quarter of 2019, with the manufacturing indicators pointing to continued weakness in the sector. However, financial conditions and consumers’ outlook for the economy remain positive, which should support growth of about 2 percent through early 2020.”

About The Conference Board Leading Economic Index® (LEI) for the U.S.

The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading, coincident, and lagging economic indexes are essentially composite averages of several individual leading, coincident, or lagging indicators. They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component – primarily because they smooth out some of the volatility of individual components.

recession indicators

The ten components of The Conference Board Leading Economic Index® for the U.S. include:

Average weekly hours, manufacturing

Average weekly initial claims for unemployment insurance

Manufacturers’ new orders, consumer goods and materials

ISM® Index of New Orders

Manufacturers’ new orders, nondefense capital goods excluding aircraft orders

Building permits, new private housing units

Stock prices, 500 common stocks

Leading Credit Index™

Interest rate spread, 10-year Treasury bonds less federal funds

Average consumer expectations for business conditions

PredictIt: Recession in Trump’s First Term?

Predictit recession indicators sentiment
As of April 3, 2020 Suggests Traders on that site are at 92% Chance of Trump Recession in 1st Term. (This is more of a sentiment gauge as recession indicators go.) Public Update

The last public update from Recession Alert was issued prior to their anyone’s knowledge of the coronavirus, on Dec. 13, 2019, and was titled “U.S. economy likely dodged a bullet.”

Recession Alert wrote in their blog “Reflections”:

For two years, our comprehensive U.S monthly Leading Index (USMLEI) has been deteriorating, more recently to worrisome levels, with exactly half of the 23 components now in recession territory…

What was really alarming was that this was occurring against the background of elevated RAVI local stock market valuations, an inverted yield curve, a deteriorating Global LEI, a US housing market recession and a global trade recession.

We think the worst is likely over however. Notwithstanding a likely de-escalation in the US-China trade war and a massive $465Bn jump in liquidity via upcoming FED Open Market Repo Operations, all the other concerning factors bar valuations seemed to have turned corners. on Dec. 13, 2019

Obviously, even when Leading Recession Indicators begin turning up, and they had, up against the coronavirus pandemic, it is becoming all to apparent that these Leading Economic Indicators likely had not turned up strong enough and for long enough.

We are eager to see what Recession Alert has to say in their next update.

ECRI Leading Index

ECRI LEI Recession Indicators
ECRI’s Weekly Leading Economic Indicator (WLI) and Weekly Coincident Economic Indicator plus Future Inflation Gauge (FIG) for WE March 20, 2020 and Reported on April 3

During March, 2020 the ECRI Leading and Coincident Indexes fell out of bed, plumbing lows not seen since the Great Recession:

Weekly Leading Index Worse Since Great Recession

ECRI’s U.S. Weekly Leading Index (WLI) during the week ending March 20th plunged to 113.1 while the growth rate plummeted to -15.5%. Both readings are their lowest since the Great Recession.  The following week, WE March 27th, ECRI’s U.S. Weekly Leading Index growth rate plummeted further into the deepest of Great Recession lows at -26.9%.

ECRI  has a US-centric Leading Economic Index that has been in use for a longer time than Recession Alert’s index above. Unlike Recession Alert, the ECRI WLI (Weekly Leading Index) does not apply a probability of recession axis to their WLI, but the index does a good job in highlighting turning points present and future in the US economy, and as such, “periods of vulnerability.”

According to ECRI’s webiste, the ECRI WLI is ” designed to predict the timing of future changes in the economy’s direction. They signal those turns before the fact, and well before the consensus. ECRI’s focus is on identifying when those changes in direction will occur (see above chart).

According to the mainstream view, recessions are caused by shocks propagating through the economy. In contrast, our framework, based on many decades of research, finds that endogenous cyclical forces periodically open up windows of cyclical vulnerability that make it much easier for exogenous shocks to precipitate recessions. In the absence of cyclical weakness, such shocks are not recessionary. Because our leading indexes monitor when the economy becomes susceptible to shocks, they effectively anticipate recessions.”

Global Leading Economic Recession Indicators

OECD Composite Leading Indicator

OECD Composite Leading Indicator (CLI) is designed to provide early signals of turning points in business cycles showing fluctuation of the economic activity around its long term potential level. CLIs show short-term economic movements in qualitative rather than quantitative terms.

October 2019 – Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend six to nine months ahead, continue to point to easing growth momentum in the OECD area as a whole, and major economies such as the United States.  

Easing growth momentum remains the assessment for the United Kingdom, Canada and the euro area as a whole, including Germany, France and Italy, with similar signs now also emerging in the United States. 

OECD (2020), Composite leading indicator (CLI) (indicator). doi: 10.1787/4a174487-en (Accessed on 13 March 2020)