3,882
edits
Economic Outlook: Difference between revisions
no edit summary
No edit summary |
No edit summary |
||
| Line 30: | Line 30: | ||
What is the current data telling us? | What is the current data telling us? | ||
1. | # Pending home sales in the US plummeted by 37% year-on-year in October of 2022, the sharpest yearly decline on record. <ref>https://tradingeconomics.com/united-states/pending-home-sales</ref> | ||
# Building permits in the United States tumbled 10.6 percent from a month earlier to a seasonally adjusted annual rate of 1.351 million in November 2022, the lowest level since June 2020. Builsing permits is down 30% since peak in dec 2021. <ref>https://tradingeconomics.com/united-states/building-permits</ref> | |||
# Real residential investment GDP on Q3 2022 was -27.1%<ref>https://www.bea.gov/sites/default/files/2022-12/gdp3q22_3rd.pdf</ref> | |||
# The NAHB housing market index in the US declined to 31 in December of 2022, a fresh low since 2012 excluding the immediate onset of the pandemic. <ref>https://tradingeconomics.com/united-states/nahb-housing-market-index</ref> | |||
In conclusion, since housing activity is the biggest driver in weakness in gdp prior to the recession, its success in predicting a recession, the fact that there is a low probability that there will be massive stimilus to avoid a recession due to the FED narrative and their figh against inflation, and that the significant decline in activty started in Q2 2022, there is a high likehood that relying on this indicators the recession risks in the US economy are amplify significant in Q2 2023 onwards. | |||
=== 3. Conference Board Leading Index === | |||
The LEI is comprised of 10 indicators that cover a wide range of economic activity, including job growth, housing construction, and stock prices. The index is designed to provide a broad-based look at the health of the economy and can be used to predict turning points in the business cycle. | |||
When the US LEI falls more than 4 percent over a span of six months, it enters recessionary territory. One way to track the LEI is by looking at the six-month change in the index (Chart 2). This measure tells us whether the economy is gaining or losing momentum and can be used to predict changes in direction. While tracking the six-month change in the LEI is a good way to assess whether a recession is on the horizon, it’s not perfect. The signal provided by the LEI can be refined by considering a metric known as “diffusion.” Diffusion indexes measure how widespread economic activity is across different sectors and types of economic activity (e.g., consumers, housing, financial markets, etc.). Diffusion tells us whether an economy is truly weakening or if there are just isolated pockets of weakness that do not translate into a broad downturn in overall economic activity across the board. | |||
The 3Ds rule provides signals of impending recessions 1) when the diffusion index falls below the threshold of 50 and simultaneously 2) when the decline in the index over the most recent six months falls below the threshold of -4.0 percent. <ref>https://www.conference-board.org/topics/recession/Leading-Indicators-Recession</ref> The index has a average lead time of 7 months and has a 100% track record when the Y/Y change turns negative for 2+ months in a row. | |||
What is the current data telling us? | |||
# The Conference Board Leading Economic Index® (LEI) for theU.S. decreased by 1.0 percent in November 2022 to 113.5 (2016=100), following a decline of 0.9 percent in October. The LEI is now down 3.7 percent over the six-month period between May and November 2022—a much steeper rate of decline than its 0.8 percent contraction over the previous six-month period, between November 2021 and May 2022. The decline was broad-based and only the stock market showed a positive contribution, though it has wobbled of late.<ref>https://www.conference-board.org/topics/us-leading-indicators</ref> | |||
# Recession signal has hit in August 2022.<ref>https://www.conference-board.org/topics/us-leading-indicators/press/us-lei-sept-2022#:~:text=The%20Conference%20Board%20Leading%20Economic,over%20the%20previous%20six%20months.</ref> | |||
In conclusion, based on the index criteria the recession signal was hit on August 2022, and since then the index has deteriorated further, giving the track record of the index and the lead time of 7 months, there is a high likehood that relying on this indicator the recession risks in the US economy are amplify significant in Q2 2023 onwards. | |||
=== 4. ISM new orders === | |||
== References == | == References == | ||