The Experimental Index of Coincident Indicators (XCI) dropped to 244.6 in December from 245.6 in November, 246.0 in October, and 246.5 in September, based on the most recently available data. Thus, during the three months from September to December the XCI fell by 3.0% at an annual rate. During the previous three months from June to September, the XCI grew 2.3% at an annual rate. Over the entire six months from June to December, the XCI therefore fell 0.4% at an annual rate.
The Experimental Leading Index (XLI) for December is 3.0. This index, based on seven leading indicators, is a forecast of the percentage growth of the XCI (at an annual rate) over the next six months, from December to June 2001. The December XLI forecasts a rate of growth during the next six months that is stronger than we have seen during the past six months.
Of the indicators used to calculate the XLI, three made a positive contribution to the index, relative to trend: manufacturers' unfilled orders; the yield on 10-year U.S. Treasury bond; and the premium on 3-month commercial paper over 3-month U.S. Treasury bills. Three of the indicators made negative contributions to the index, relative to trend: exchange rates; part-time employment due to slack work; and the spread between the yield on 10-year vs. 1-year U.S. Treasury bonds. One indicator, housing authorizations (building permits), made no net contribution relative to trend.
Based on the most recent data, the Experimental Recession Index (XRI), which estimates the probability that the economy will be in a recession six months later, was 8% in December, indicating an 8% probability that the economy will be in a recession in June 2001. The alternative experimental recession index (the XRI-2), which is based on seven leading indicators that do not include interest rates or interest rate spreads, estimates a 14% probability that the economy will be in a recession in June 2001.
Figure 4 shows the probability that the economy will be in a recession during each of the months from December to June 2001, computed using data through December. Based on the data through December for the variables in the XRI, the probability that the economy was in a recession in December is 15%, the probability of being in a recession in January 2001 is 7%, and the probability of being in a recession in June is 8%. Based on the variables in the XRI-2, the probability that the economy was in a recession in December is 18%, the probability of being in a recession in January 2001 is 16%, and the probability of being in a recession in June is 14%.
For further information contact:
James Stock phone: (617) 496-0502 email: james_stock@harvard.edu
Mark Watson phone: (609) 258-4811 email: mwatson@princeton.edu
| Experimental Leading Index (XLI) | 3.0 |
| Experimental Recession Index (XRI) | 8 % |
| Experimental Coincident Index (XCI) | 244.6 |
| Nonfinancial Experimental Recession Index (XRI-2) | 14 % |
| Series | Contribution |
|---|---|
| Housing starts (building permits) | 0.0 |
| Manufacturers' unfilled orders (durable goods industries) | 0.1 |
| Trade-weighted exchange rate | -0.2 |
| Part-time work | -0.7 |
| Interest rate on 10-year U.S. Treasury bonds | 0.2 |
| Interest spread: 3-month commercial paper minus 3-month T-bills | 0.4 |
| Interest spread: 10-year minus 1-year Treasury bonds | -0.2 |
| Trend | 3.5 |
| 00:11 | 00:10 | 00:09 | 00:08 | 00:07 | 00:06 | 00:05 | 00:04 | 00:03 | 00:02 | 00:01 | 99:12 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| XLI | 3.3 | 3.1 | 3.1 | 3.3 | 4.3 | 3.4 | 2.0 | 2.9 | 3.5 | 4.2 | 5.0 | 4.0 |
| XRI | 10 % | 7 % | 4 % | 3 % | 3 % | 4 % | 10 % | 4 % | 3 % | 2 % | 2 % | 4 % |
| XCI | 245.6 | 246.0 | 246.5 | 246.1 | 245.6 | 245.1 | 244.9 | 244.3 | 243.1 | 242.1 | 241.6 | 240.3 |
| XRI-2 | 7 % | 9 % | 10 % | 9 % | 10 % | 12 % | 12 % | 12 % | 10 % | 7 % | 5 % | 7 % |
| Components of the Experimental Leading Index | ||||||||||||
| Housing BP | 0.7 | 0.3 | -0.1 | -0.4 | -0.4 | -0.7 | -1.2 | -1.0 | -0.7 | 0.3 | 1.2 | 0.7 |
| MD Unf Ord | 0.6 | 0.4 | 0.5 | 0.7 | 1.0 | 1.3 | 0.8 | 0.5 | 0.4 | 0.5 | 0.6 | 0.6 |
| Exchange Rates | -0.3 | -0.2 | 0.2 | 0.2 | -0.0 | -0.1 | -0.1 | -0.0 | -0.1 | -0.0 | 0.1 | 0.2 |
| Part Time Wk. | -1.1 | -1.0 | -1.2 | -0.7 | -0.1 | -0.4 | -0.7 | -0.1 | 0.1 | 0.0 | -0.4 | -0.4 |
| 10yr TBond Rate | 0.1 | 0.1 | 0.2 | 0.2 | 0.1 | -0.0 | 0.1 | 0.3 | 0.2 | -0.1 | -0.3 | -0.2 |
| 3mtCP,3mtTB Spr | 0.0 | 0.2 | -0.1 | -0.2 | -0.1 | -0.4 | -0.9 | -0.6 | -0.1 | -0.1 | -0.2 | -0.8 |
| 10yrTB,1yrTB Spr | -0.5 | -0.4 | -0.4 | -0.6 | -0.4 | -0.4 | -0.2 | -0.4 | -0.5 | -0.4 | -0.1 | -0.1 |
| Trend | 3.8 | 3.8 | 4.1 | 4.2 | 4.2 | 4.1 | 4.2 | 4.3 | 4.3 | 4.1 | 4.2 | 4.1 |
