The Global Economy is on the brink of a recession with 58% of 29 OECD countries experiencing business cycle contractions. The chart below shows OECD defined global contractions (grey shaded areas) together with the percentage of 29 OECD member countries experiencing slowdowns. It is evident that whenever 50% or more of countries enter contraction (red dotted line) that the odds of global recession are very high. The blue lines show NBER recessions for the U.S and we see that whilst […]
Archive | Reflections RSS feed for this section
Retail sales data not supportive of recession
The September RETAIL SALES component (RSAFS) of the NBER Recession Model was in today. It surprised to the upside as well as had an upward revision on the prior month. For the most part, this series has been revised downwards over time of late, but this does not necessarily equate to downward revisions to the real-time observed 12-month growth rates. This is shown below where we compare the growth rate of a series that only looks at real-time published data […]
Read full story · Comments are closed
50 State Co-incident update : No Recession
A while back we published an interesting project (Predicting US Recessions with State co-incident data) to see if we could get some advance recession warning from the co-incident indices of the 50 US states. We built a composite economic index of 50 U.S states as published by the Philadelphia Federal Reserve, combined in a positively-weighted index (CEI) that is statistically regressed with NBER & 3-months prior dates (hence the “leading” characteristics of the composite.) It aims to give 3 months […]
Read full story · Comments are closed
CFNAI- revisions and recessions
The latest CFNAI-MA3 reading came in at -0.47 from last weeks -0.26 (revised down from -0.21). This downward jump (and downward revision) naturally has everyone on edge. We are not yet concerned with this reading as it is not being corroborated by any leading indicators. However with the perma-bears now being forced to hang their hats onto the “revisions” coat-hook recently, this reading appears uncomfortably close to the -0.7 recession trigger for those spooked by the perma-bears’ gloomy predictions. We looked […]
Read full story · Comments are closed
Judging Recession Forecasting Accuracy
In August 2011, ECRI declared a recession was upon us. If you spend enough time examining their initial proclamations it was literally that a recession was imminent, saying “It’s either just begun, or it’s right in front of us.” Subsequently they revised their call, saying the recession would hit “by mid year” 2012. At that time an array of proprietary leading indicators were in contagion. Hussman and others followed suit with bearish outlooks. In January 2012 we said we couldn’t see it. The general response from the […]
Read full story · Comments are closed
Here we go again…
WE DON’T SEE IMMINENT RECESSION & NEITHER SHOULD THE NBER We find ourselves in the 3rd “summer slowdown scare”, just like 2010 and in August 2011. During this time the perma-bears crank up the alarm bells and we are bombarded with a cacophony of ill tidings that spell the doom of the U.S economy. As we saw in 2010 and 2011 the economic slowdowns turned out to be “soft landings”. Investors scared into the side-lines stared in disbelief as the […]
Read full story · Comments are closed
On standby for a Great Trough
13 June 2012 UPDATE: This Great Trough is not done yet, we may well re-test prior lows in the bottom-making process. The breadth- index head-faked and fell below 26% yesterday meaning the countdown timer will be reset. We now await for the index to rise above 26 again and attempt a second strike through 87 within 15 trading days. We then issue the BUY signal. For a detailed background, mechanics and statistics of this system read The Great Trough Detector Project on our RESEARCH […]
Read full story · Comments are closed
Can the U.S skirt global recession?
With many parts of the Euro-zone entering or already in recession, and the OECD recently putting Australia, Germany and Italy into recession, one has to wonder if the feeble U.S recovery can skirt a global recession. Many mainstream pundits have been pointing to countries around the globe slipping into recession as a reason why a U.S recession in the near future is a done deal. But this is not necessarily the case. The chart below shows which percentage of the 39 OECD countries across the world have their […]
Read full story · Comments are closed
ECRI WLI Growth Conundrum
More recently, ECRI has switched from the use of smoothed 6-month growth rates (as calculated by their WLIg growth metric) to annual (52-week) growth numbers of its Weekly Leading Index (WLI) to prop up a recession scenario. The reason cited is “…a widespread seasonal adjustment problem that economists have known about for some time.” Another native Capetonian, Prieur du Plessis, who regularly tracks the WLI has posted an excellent analysis of the rationale behind this descision that highlights some interesting subtleties between the […]
Read full story · Comments are closed
U.S economy almost back to par growth
The U.S Coincident SuperIndex, which estimates U.S economic current growth, is within a whisker of returning to the growth rate normally averaged by the economy after 33 months into an expansion, as shown by the chart on the left. However, cumulative growth since the start of the expansion still remains sub-par (right chart) due to 22 months of sub-par growth. The recent 5 months of growth, coupled with almost reaching the par growth level are encouraging, but the sub-par cumulative expansion […]
Read full story · Comments are closed
A Recession Fear Indicator
An analysis of Google global search volume for the term “recession” reveals a promising new recession indicator that nailed the official NBER start of the 2008 great recession to within 2 week lag of its peak. It is also interesting to note the spike in mid-to-late August 2011 (around the time the SP-500 bottom that was forming), and subsequent fall in the SuperIndex around the time new recessionary fears peaked. It is unfortunate we do not have history going further […]
Read full story · Comments are closed