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– March 25, 2015

Early last year, severe weather restrained the U.S. economy and distorted economic data. Though gross domestic product (GDP) fell at a 2.1 percent annual rate in the year’s first quarter and the proportion of AIER’s leading indicators deemed to be expanding fell to 67 percent in February 2014, we cautioned against panicking. Subsequently, real GDP growth rebounded, posting annual expansion rates of 4.6 percent in the second and 5.0 percent in the third quarter.

A year later, weather has again been severe in much of the nation. Meanwhile, the U.S. expansion once again shows signs of weakness and the proportion of AIER’s leading indicators expanding fell to 50 percent, an important threshold. However, our cyclical score of leading indicators remains well above that level (Chart 1). The most accurate signal of a coming downturn occurs when both the percentage of expanding leading indicators and AIER’s cyclical score fall below 50.

Whether our indicators will signal a recession remains to be seen. In this report we look at areas of strength and weakness in the economy and financial-market performance to better understand the risks to the outlook.

Next/Previous Section:
1. Overview
2. Economy
3. Inflation
4. Policy
5. Investing
6. Pulling It All Together/Appendix

AIER Staff

Founded in 1933, the American Institute for Economic Research (AIER) is one of the oldest and most respected nonpartisan economic research and advocacy organizations in the country. With a global reach and influence, AIER is dedicated to developing and promoting the ideas of pure freedom and private governance by combining advanced economic research with accessible media outreach and educational programming to cultivate a better, broader understanding of the fundamental principles that enable peace and prosperity around the world.

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