The year-over-year rate of growth of various coincident indices relative to the previous month were mixed this month – but their growth rates show a weak economy.
Analyst Opinion of the Current Status of the Coincident Indicators
The reality is that most of the economic indicators have moderate to significant backward revision – and this month they are showing slowing growth. Out of this group of coincident indicators discussed in this post, only ECRI and the Aruoba-Diebold-Scotti business conditions index have no backward revision – and both have a good track record of seeing the economy accurately in almost real-time.
Economic indicators that coincide with economic movements are coincident indicators. Coincident indicators by definition do not provide a forward economic view. However, trends are valid until they are no longer valid, making the trend lines on the coincident indicators a forward forecasting tool.
Note that the indices discussed in this post are the last release of that index,
Overall the coincident indices are indicating a slow rate of growth:
Generally, the coincident indices are showing modest growth. Econintersect‘s analysis of the coincident indices is that:
- The Philly Fed US Coincident index year-over-year rate of growth marginally improved from last month – but the year-over-year growth rate is below the levels seen in the last few years.
- The Aruoba-Diebold-Scotti business conditions show below-average business conditions.
- The rate of growth of the Conference Board Coincident Index marginally improved but is in the low part of the range seen since the end of the Great Recession.
- ECRI’s Coincident Index’s rate of growth declined – and remains below average for the values seen in the last 2 years.
- The CFNAI rate of growth is below the historical trend rate of growth (zero-line) – but improved.
Excerpt from Philly Fed Report for the United States Coincident Index
[click graph below to enlarge]The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for September 2019. Over the past three months, the indexes increased in 42 states, decreased in six states, and remained stable in two, for a threemonth diffusion index of 72. In the past month, the indexes increased in 39 states, decreased in eight states, and remained stable in three, for a one-month diffusion index of 62. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 0.7 percent over the past three months and 0.3 percent in September.
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In the graph below, the blue line shows the year-over-year growth rate of the US Coincident Index, while the red line shows the month-over-month change.
Aruoba-Diebold-Scotti Business Conditions Index
Per the Philly Fed:
The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying (seasonally adjusted) economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data. Both the ADS index and this web page are updated as data on the index’s underlying components are released.
The average value of the ADS index is zero. Progressively bigger positive values indicate progressively better-than-average conditions, whereas progressively more negative values indicate progressively worse-than-average conditions. The ADS index may be used to compare business conditions at different times. A value of -3.0, for example, would indicate business conditions significantly worse than at any time in either the 1990-91 or the 2001 recession, during which the ADS index never dropped below -2.0.
The vertical lines on the figure provide information as to which indicators are available for which dates. For dates to the left of the left line, the ADS index is based on observed data for all six underlying indicators. For dates between the left and right lines, the ADS index is based on at least two monthly indicators (typically employment and industrial production) and initial jobless claims. For dates to the right of the right line, the ADS index is based on initial jobless claims and possibly one monthly indicator.
Conference Board’s Coincident Index (red line):
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ECRI’s USCI (U.S. Coincident Index):
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Chicago Fed National Activity Index (CFNAI)
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