The latest batch of data indicate that the economy is weak and the outlook remains poor. 

Most of our 12 Leading Indicators continue to contract, and we downgraded our appraisal of the cyclical status of one series. As a result, the percent of leaders appraised as expanding decreased from 38 last month to 33 this month. A percentage below 50 indicates that a recession is probable.

However, the AIER Cyclical Score for the leaders increased to 55 this month, from a revised score of 53 last month. Here again, 50 is the key threshold, and a score above 50 suggests the economy is likely to expand. So our two leading indexes, the percent expanding and the Cyclical Score, are sending conflicting signals.

The Cyclical Score is based on a separate, purely mathematical analysis of the leaders. It differs from the percent of leaders expanding in several respects: It does not reflect the judgments of AIER’s staff, and it is subject to revision each month. Last month’s score was revised downward from 55 to 53, as new data became available. We can’t predict the direction of any future revisions, but downward ones could quickly push the score below 50 and into recession territory.

We rely on the Cyclical Score primarily to supplement the percent expanding index. We interpret the diverging trends in these two indexes as follows: We think the economy is likely to contract in coming months, but we are less confident in this assertion than we would be if the Cyclical Score were sending the same signal.

Separately, the percent of AIER Coincident Indicators expanding remains below 50. The coinciders reflect current business conditions. They are of little use in predicting the future cyclical course of the economy. A percentage below 50 indicates that a contraction of general business activity is probably now underway.