The Experimental Index of Coincident Indicators (XCI) fell to 240.7 in August from its July value of 241.2, based on the most recently available data. During the three months from May to August the XCI fell by 1.6% at an annual rate. During the previous three months from February to May, the XCI fell by 1.3% at an annual rate. Over the entire six months from February to August, the XCI therefore fell 1.5% 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 August is 49%. Historical values of this Experimental Concident Recession Index (XRI-C) are shown in Figure 4. These figures are based on data for August and thus predate the September 11 terrorist attack. According to these estimates, there were even odds that the economy was in a recession just prior to the attack.
The Experimental Leading Index (XLI) for August is 2.4. 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 August to February 2002.
Of the indicators used to calculate the XLI, three made a positive contribution to the index, relative to trend: the yield on 10-year U.S. Treasury bonds; 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. Three of the indicators made a negative contribution to the index, relative to trend: housing authorizations (building permits); manufacturers' unfilled orders; and exchange rates. One of the indicators, part-time employment due to slack work, made no net contribution to the XLI, 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 7% in August, indicating a 7% probability that the economy will be in a recession in February 2002. 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 an 11% probability that the economy will be in a recession in February 2002.
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) | 2.4 |
| Experimental Leading Recession Index (XRI) | 7 % |
| Experimental Coincident Index (XCI) | 240.7 |
| Experimental Coincident Recession Index (XRI-C) | 49 % |
| Nonfinancial Experimental Leading Recession Index (XRI-2) | 11 % |
| Series | Contribution |
|---|---|
| Housing starts (building permits) | -0.3 |
| Manufacturers' unfilled orders (durable goods industries) | -0.8 |
| Trade-weighted exchange rate | -0.2 |
| Part-time work | 0.0 |
| Interest rate on 10-year U.S. Treasury bonds | 0.2 |
| Interest spread: 3-month commercial paper minus 3-month T-bills | 1.0 |
| Interest spread: 10-year minus 1-year Treasury bonds | 0.4 |
| Trend | 2.1 |
| 01:07 | 01:06 | 01:05 | 01:04 | 01:03 | 01:02 | 01:01 | 00:12 | 00:11 | 00:10 | 00:09 | 00:08 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| XLI | 1.6 | 0.6 | 2.5 | 2.6 | 3.5 | 4.2 | 4.5 | 3.2 | 3.4 | 3.1 | 3.1 | 3.7 |
| XRI | 12 % | 18 % | 6 % | 6 % | 5 % | 4 % | 4 % | 6 % | 11 % | 8 % | 5 % | 3 % |
| XCI | 241.2 | 240.4 | 241.7 | 241.6 | 242.4 | 242.5 | 242.8 | 243.5 | 243.9 | 244.0 | 243.9 | 243.8 |
| XRI-C | 28 % | 80 % | 42 % | 57 % | 34 % | 41 % | 44 % | 17 % | 8 % | 5 % | 4 % | 2 % |
| XRI-2 | 12 % | 17 % | 12 % | 16 % | 15 % | 9 % | 7 % | 11 % | 7 % | 9 % | 10 % | 7 % |
| Components of the Experimental Leading Index | ||||||||||||
| Housing BP | -0.3 | -0.3 | -0.3 | -0.4 | 0.1 | 0.9 | 1.1 | 0.1 | 0.5 | 0.1 | -0.0 | -0.2 |
| MD Unf Ord | -0.8 | -1.0 | -0.7 | -0.3 | -0.7 | -0.5 | -0.4 | 0.2 | 1.0 | 0.6 | 0.6 | 0.9 |
| Exchange Rates | -0.2 | -0.1 | -0.1 | -0.0 | 0.3 | 0.3 | 0.1 | -0.2 | -0.3 | -0.2 | 0.2 | 0.2 |
| Part Time Wk. | -1.2 | -1.6 | -0.4 | -0.2 | 0.4 | -0.4 | -0.7 | -0.7 | -1.1 | -1.0 | -1.3 | -0.7 |
| 10yr TBond Rate | 0.0 | -0.2 | -0.2 | -0.1 | 0.1 | 0.2 | 0.3 | 0.2 | 0.1 | 0.1 | 0.2 | 0.2 |
| 3mtCP,3mtTB Spr | 1.2 | 1.0 | 0.8 | 0.3 | 0.1 | 0.4 | 0.6 | 0.4 | 0.0 | 0.2 | -0.1 | -0.2 |
| 10yrTB,1yrTB Spr | 0.3 | 0.5 | 0.8 | 0.7 | 0.3 | 0.1 | 0.3 | -0.2 | -0.5 | -0.4 | -0.4 | -0.6 |
| Trend | 2.5 | 2.3 | 2.7 | 2.7 | 3.0 | 3.2 | 3.3 | 3.5 | 3.6 | 3.8 | 3.9 | 4.1 |
