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Real Time Recession Indicator: 9.5.12

A real time recession indicator constructed from a composite of leading economic indicators, high frequency economic data, and SP500 pricing models continues to suggest that the US economy is NOT in recession.

This composite indicator utilizes data from the Economic Cycle Research Institute (WLI, LEI), the Philadelphia Federal Reserve (Aruoba-Diebold-Scotti Business Conditions Index), and the Chicago Federal Reserve (Chicago Fed National Activity Index). Furthermore, two SP500 price models (one proprietary and one not) are monitored. The data from the regional Federal Reserves and the ECRI continue to firm to the positive. In addition, the priced based models are far from confirming a recession. Although not in recession territory, growth isn't exactly robust either as most measures are hugging the zero lines.

Figure 1 is a weekly chart of the SP500 with the composite Real Time Recession Indicator in the lower panel. With the indicator below the midline, the US economy is NOT in recession. Past and recent signals are shown. The 2011 signal turned out to be false and coincides with the launch of Operation Twist.

Figure 1. SP500/ weekly

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Figure 2 is a monthly chart of the SP500 with a composite indicator in the lower panel, which was constructed from the leading economic indicators for the 10 US states with the largest economies. This indicator is weighted and the data is courtesy of the Philadelphia Federal Reserve. These 10 states represent over 50% of the US economy. The indicator is not in recession territory, yet the data is far from robust as some states are showing signs of recession.

Figure 2. SP500/ monthly

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