The Experimental Index of Coincident Indicators (XCI) fell to 244.1 in February, down from its January value of 244.6 and its December value of 244.8, based on the most recently available data. During the three months from November to February the XCI fell by 2.1% at an annual rate. During the previous three months from August to November, the XCI fell by 1.1% at an annual rate. Over the entire six months from August to February, the XCI therefore fell 1.6% at an annual rate. Swings in the XCI are greater than swings in real GDP, so negative growth in the XCI can be consistent with growth of GDP that is small but positive.
A calculation based on the variables in the XCI indicates that the probability that the economy was in a recession in February is 50%. Historical values of this Experimental Concident Recession Index (XRI-C) are shown in Figure 4.
The Experimental Leading Index (XLI) for February is 4.9. 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 February to August 2001.
Of the indicators used to calculate the XLI, five made a positive contribution to the index, relative to trend: housing authorizations (building permits); exchange rates; the yield on 10-year U.S. Treasury bond; the premium on 3-month commercial paper over 3-month U.S. Treasury bills; and the spread between the yield on 10-year vs. 1-year U.S. Treasury bonds. Two of the indicators made a negative contribution to the index, relative to trend: manufacturers' unfilled orders; and part-time employment due to slack work.
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 3% in February, indicating a 3% probability that the economy will be in a recession in August 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 7% probability that the economy will be in a recession in August 2001.
Taken together, these recession indexes suggest that although there is an even chance that the economy was in a recession in February, the probability of being in a recession in August 2001 is less than 10%. Similarly, even though the XCI has fallen for five months in a row, based on the variables in the XLI the outlook is for positive growth over the next six months. The differences in these indexes reflect continued strength in some of the indicators entering the XLI, particularly housing starts.
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) | 4.9 |
| Experimental Leading Recession Index (XRI) | 3 % |
| Experimental Coincident Index (XCI) | 244.1 |
| Experimental Coincident Recession Index (XRI-C) | 50 % |
| Nonfinancial Experimental Leading Recession Index (XRI-2) | 7 % |
| Series | Contribution |
|---|---|
| Housing starts (building permits) | 1.2 |
| Manufacturers' unfilled orders (durable goods industries) | -0.1 |
| Trade-weighted exchange rate | 0.3 |
| Part-time work | -0.4 |
| 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 | 0.1 |
| Trend | 3.2 |
| 01:01 | 00:12 | 00:11 | 00:10 | 00:09 | 00:08 | 00:07 | 00:06 | 00:05 | 00:04 | 00:03 | 00:02 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| XLI | 5.2 | 3.2 | 3.4 | 3.1 | 3.1 | 3.3 | 4.3 | 3.4 | 2.0 | 2.9 | 3.5 | 4.2 |
| XRI | 2 % | 7 % | 10 % | 8 % | 4 % | 3 % | 3 % | 4 % | 10 % | 4 % | 3 % | 2 % |
| XCI | 244.6 | 244.8 | 245.4 | 245.9 | 246.5 | 246.1 | 245.6 | 245.1 | 244.9 | 244.3 | 243.1 | 242.1 |
| XRI-C | 35 % | 36 % | 19 % | 10 % | 1 % | 2 % | 2 % | 1 % | 1 % | 1 % | 1 % | 1 % |
| XRI-2 | 5 % | 13 % | 7 % | 9 % | 10 % | 9 % | 10 % | 12 % | 12 % | 12 % | 10 % | 7 % |
| Components of the Experimental Leading Index | ||||||||||||
| Housing BP | 1.2 | -0.0 | 0.7 | 0.3 | -0.1 | -0.4 | -0.4 | -0.7 | -1.2 | -1.0 | -0.7 | 0.3 |
| MD Unf Ord | 0.0 | 0.2 | 0.7 | 0.4 | 0.5 | 0.7 | 1.0 | 1.3 | 0.8 | 0.5 | 0.4 | 0.5 |
| Exchange Rates | 0.1 | -0.2 | -0.3 | -0.2 | 0.2 | 0.2 | -0.0 | -0.1 | -0.1 | -0.0 | -0.1 | -0.0 |
| Part Time Wk. | -0.7 | -0.7 | -1.1 | -1.0 | -1.2 | -0.7 | -0.1 | -0.4 | -0.7 | -0.1 | 0.1 | 0.0 |
| 10yr TBond Rate | 0.3 | 0.2 | 0.1 | 0.1 | 0.2 | 0.2 | 0.1 | -0.0 | 0.1 | 0.3 | 0.2 | -0.1 |
| 3mtCP,3mtTB Spr | 0.6 | 0.4 | 0.0 | 0.2 | -0.1 | -0.2 | -0.1 | -0.4 | -0.9 | -0.6 | -0.1 | -0.1 |
| 10yrTB,1yrTB Spr | 0.3 | -0.2 | -0.5 | -0.4 | -0.4 | -0.6 | -0.4 | -0.4 | -0.2 | -0.4 | -0.5 | -0.4 |
| Trend | 3.4 | 3.6 | 3.7 | 3.8 | 4.1 | 4.2 | 4.2 | 4.1 | 4.2 | 4.3 | 4.3 | 4.1 |
