A new monthly leading US index

By RecessionALERT on March 3, 2016 in Research Papers

Many monthly leading indices published for the U.S have about 10 indicator components, and we wanted one that had at least double this. The components of the new index are all monthly time series and are as follows:

01.Labor Market Composite (19 indicators)
02.Housing Market Composite (6 indicators)
03.Enhanced Yield Curve (EYC)
04.Money Supply Aggregate
05.Stock Market
06.Margin Debt
07.Treasury/Corporate Bond market
08.Inventories & Sales
09.Sales of heavy duty trucks
10.Manufacturing : Durable Goods
11.Manufacturing : Weekly Overtime hours
12.Manufacturing : Business Activity Changes
13.Consumer Sentiment
14.Measurement of tightening loan standards
15.Freight Shipments & Expenditures
16.EYC%-CPI% +Unemployment rate%
17. Credit Market Index (35 indicators)
18. Percentage of US states with rising unemployment
19. Percentage of US states with rising coincident indices
20.Initial and Continuing Claims
21.Lumber & Construction materials sales
22. Mortgage Backed Securities held by banks
23. C& I Delinquency rates

The far broader, more timely index offers much more comfort that nothing will be missed.

This is what the model is showing up to and including January 2016:

We have also deployed four separate recession probability model interpretations on the dataset, depicted below, and which you can read about here. Using our preferred method of taking the average of the highest two probabilities from the four has historically provided excellent recession warning with zero false positives, even with the 2020 Covid man-made recession (9 months warning) which almost every other commercial US leading indicator failed to detect in advance:

The model also creates separate Long-leading and Short-leading U.S economic indicators from the 21 components. The various lead times of the various models associated with past US recessions is depicted below:

The high number of components used, makes the USMLI one of the most comprehensive US leading indexes published today. This is our most popular monthly download among institutional clients.

A complimentary USMLEI monthly report from Dec 2022 is available below:

About RecessionALERT

Dwaine has a Bachelor of Science (BSc Hons) university degree majoring in computer science, math & statistics and is a full-time trader and investor. His passion for numbers and keen research & analytic ability has helped grow RecessionALERT into a company used by hundreds of hedge funds, brokerage firms and financial advisers around the world.

View all posts by RecessionALERT →

long leading index

← A U.S Weekly Leading Economic Index

Bear market rules still in force →

IMPORTANT DISCLAIMERS: Although many of our models rely heavily on back-testing, optimisation and probability methods, please note that past performance is NO GUARANTEE for future returns. No system devised by man can predict the future, let alone the future of the markets and economies. What we have are sets of mathematical models that use historical data and varying theories to pinpoint places in time when the STATISTICAL LIKELYHOOD of calling the start and end to recessions is the greatest. In the midst of all the best mathematical models, you can have geo-political events, wars, terrorist attacks, natural disasters and even nuclear accidents that tip everything upside down. This is always a risk factor you need to factor in on any recession call no matter how confident you are in a signal. The SuperIndexes are created through mathematical and statistical optimisation techniques that best fit the historical NBER data. There is no guarantee that out-of-sample performance will match that of prior in-sample performance.