The year-over-year rate of growth of various coincident indices was generally worse than last month – and in most cases, the rate of growth is below average.
Analyst Opinion of the Current Status of the Coincident Indicators
Hello! We are in a recession and the data has yet to catch up with the impact of the coronavirus. Coincident indicators will not show much impact until March 2020 data.
The reality is that most of the economic indicators have moderate to significant backward revision – and this month they are generally showing improved 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 However, trends are valid until they are no longer valid, making the trend lines on the coincident indicators a forward forecasting tool.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,
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 declined from last month – and the year-over-year growth rate is below the levels seen in the last few years.
- The Aruoba-Diebold-Scotti business conditions show recessionary business conditions.
- The rate of growth of the Conference Board Coincident Index was little changed.
- ECRI’s Coincident Index’s rate of growth was little changed 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 marginally 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 January 2020. Over the past three months, the indexes increased in 49 states and remained stable in one, for a three-month diffusion index of 98. In the past month, the indexes increased in 45 states, decreased in two states, and remained stable in three, for a one-month diffusion index of 86. 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 0.2 percent in January
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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):
z conference.png
ECRI’s USCI (U.S. Coincident Index):
z ecri_coin.png
Chicago Fed National Activity Index (CFNAI)
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