Chugging Along - September 25, 2019
Much has been written about the faltering economy and a recession. Despite the pessimistic sentiment, the U.S. economy continues to chug along.
The Chicago Fed’s National Activity Index is not a household name, but it is a broad-based economic gauge. It comprises 85 monthly economic indicators.
It has been positive in two of the last three months (through August), which would suggest the economy is expanding faster than the average historical rate.
The 3-month moving average, which smooths away some monthly volatility, remains just below zero but has improved over the last four months.
- It’s signaling an economy that is expanding.
The index is an excellent high-level view of economic activity, but it is backward-looking, i.e., through August.
While all data are not rosy—Europe may be nearing a recession and parts of the yield curve remain inverted, most leading indicators aren’t flashing red.
Weekly jobless claims, which have a good track record of sniffing out a recession, remain near historically low levels, while the growth rate of the Conference Board’s Leading Index has slowed but is at an all-time high.
Conclusion: an objective review suggests most ingredients that typically foreshadow a near-term recession aren’t in place today.