Business-Cycle Update: AIER Indicators Show the Economy is Probably in Recession PDF Print E-mail
Written by AIER Research Staff   
Wednesday, 02 July 2008 05:18

In April 2007, we first forecast that a recession was likely. This month our economic indicators show for the first time that a business contraction probably has begun.

We rely on six coincident indicators to tell us whether the economy is currently expanding or contracting. This month, the percentage of coinciders expanding cyclically fell to 40.  A percentage below 50 indicates the economy is probably in recession.

For clues to what the economy is likely to do in future months, we rely on twelve leading indicators of business-cycle conditions. Here, the signals are mixed. The percentage of leaders appraised as expanding fell to 38 this month, down from 44 last month. A percentage below 50 indicates the economy is likely to contract.

However, our cyclical score is sending a different signal. The score is based on a separate, purely mathematical analysis of our leading indicators. The score increased to 55 this month. A score above 50 indicates that the economy is likely to expand.

The score is subject to revision as new data become available. Given that revisions could easily push it below 50, we hesitate to give too much weight to its current signal of expansion. In our view, the outlook for the economy remains negative.

For more commentary on the economy, see the latest issue of Research Reports (subscription required).

For a description of our methodology and a list of the economic indicators we use, click here.

 

 

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Comments (2)
Pessimism
2 Tuesday, 08 July 2008 12:45
Kerry Lynch
We're not rooting for a gloomy outlook. But it's important to note when revisions in one particular direction could substantially change the story. Revisions are always a concern, but particularly when we seem - according to many data - to be at or near a turning point in the economy.
A Stake in Pessimism?
1 Wednesday, 02 July 2008 09:57
Jeremy Withers
Seems like every time the leaders point toward a turnaround, you guys emphasize that revisions could turn the data around to something more negative, which coincides with your preference for a gloomy outlook. It has been a rare post or article where you say the same thing about gloomy data possibly being revised up. I urge you to look at the comments you made when the preliminary GDP report came out for the first quarter at 0.6% growth - you commented that revisions could easily turn that number down. Of course, that estimate was revised UP. What do you have to gain by such inconsistency?

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