In January, the economy entered the second year of its recession. The magnitude of the downturn is not unprecedented by any means. Several of the past recessions brought larger decreases in gross domestic product and higher levels of unemployment. But the speed of the current deterioration is daunting. The bulk of it took place in the last quarter of 2008. AIER’s statistical indicators of business-cycle conditions continue to point to further contraction. It seems unlikely that the recession has reached its trough.

The percentage of primary leading indicators appraised as expanding fell to 17 from 20 last month.  Only two primary leading indicators—M1 money supply and the yield curve index— are appraised as expanding, but they reflect only the expansionary monetary policy. Employment situation remains grim and production continues to contract.  As a response to a slowdown, both consumer and producer prices began to fall.

The cyclical score, which is based on a separate purely mathematical analysis of the leaders, decreased to 28 from 33 last month. Both the cyclical score and the percentage of leaders expanding continue to signal that further contraction is likely.

The primary roughly coincident indicators strongly confirm that the economy is in recession. None of the indicators is appraised as expanding. The cyclical score for the coinsiders fell to 23 from 36 last month, reinforcing the view that the economy is in recession.

The recession has by now lasted for more than a year and there are no signs of a turnaround yet. 

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