The Experimental Index of Coincident Indicators (XCI) rose to 234.9 in October from 233.3 in September and 234.2 in August, based on the most recently available data. Over the three months from July to October, the XCI grew 2.2% at an annual rate, while during the three months from April to July, the XCI grew 4.4% at an annual rate. Over the six months from April to October, the XCI grew 3.3% at an annual rate.
The Experimental Leading Index (XLI) for October 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 October to April 2000. Because XCI growth has averaged approximately 3% annually since 1960, the October XLI forecasts growth somewhat below its historical average rate.
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 10% in October, indicating a 10% probability that the economy will be in a recession in April 2000.
Of the indicators used to calculate the XLI, two made a positive contribution to the index, relative to trend: exchange rates; and part-time employment due to slack work. Five of the indicators made negative contributions to the index, relative to trend: housing authorizations (building permits); manufacturers' unfilled orders; 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.
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 lower probability that the economy will be in a recession in April 2000. Based on data through October, the XRI-2 is 6%.
Figure 4 shows the probability that the economy will be in a recession during each of the months from October to April 2000, computed using data through October. Based on the data through October for the variables in the XRI, the probability that the economy was in a recession in October is 1%, the probability of being in a recession in November is 1%, and the probability of being in a recession in April is 10%. Based on the variables in the XRI-2, the probability that the economy was in a recession in October is 1%, the probability of being in a recession in November is 2%, and the probability of being in a recession in April is 6%.
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 Recession Index (XRI) | 10 % |
| Experimental Coincident Index (XCI) | 234.9 |
| Nonfinancial Experimental Recession Index (XRI-2) | 6 % |
| Series | Contribution |
|---|---|
| Housing starts (building permits) | -0.4 |
| Manufacturers' unfilled orders (durable goods industries) | -0.4 |
| Trade-weighted exchange rate | 0.4 |
| Part time work | 0.1 |
| Interest rate on 10 year U.S. Treasury bonds | -0.1 |
| Interest spread: 3 month commercial paper minus 3 month T-bills | -1.1 |
| Interest spread: 10-year minus 1-year Treasury bonds | -0.1 |
| Trend | 4.0 |
| 99:09 | 99:08 | 99:07 | 99:06 | 99:05 | 99:04 | 99:03 | 99:02 | 99:01 | 98:12 | 98:11 | 98:10 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| XLI | 1.6 | 3.0 | 3.1 | 2.9 | 2.6 | 2.0 | 1.8 | 3.2 | 4.1 | 3.5 | 4.2 | 4.5 |
| XRI | 16 % | 6 % | 5 % | 4 % | 3 % | 4 % | 7 % | 4 % | 4 % | 7 % | 7 % | 4 % |
| XCI | 233.3 | 234.2 | 233.6 | 232.9 | 231.6 | 231.1 | 230.9 | 230.1 | 229.0 | 228.8 | 227.9 | 227.0 |
| XRI-2 | 8 % | 6 % | 7 % | 7 % | 10 % | 12 % | 7 % | 4 % | 4 % | 4 % | 5 % | 4 % |
| Components of the Experimental Leading Index | ||||||||||||
| Housing BP | -0.7 | 0.3 | 0.4 | 0.0 | -0.9 | -1.0 | -0.2 | 0.7 | 1.1 | 0.7 | 0.9 | 1.1 |
| MD Unf Ord | 0.0 | -0.0 | -0.1 | -0.1 | -0.0 | -0.1 | -0.3 | -0.0 | 0.1 | -0.3 | -0.6 | -0.5 |
| Exchange Rates | 0.0 | -0.2 | -0.2 | -0.1 | -0.3 | -0.2 | 0.1 | 0.1 | 0.3 | 0.7 | 0.6 | 0.1 |
| Part Time Wk. | 0.3 | -0.1 | -0.2 | -0.3 | 0.1 | -0.2 | -1.1 | -0.8 | -0.3 | 0.1 | 0.8 | 1.2 |
| 10yr TBond Rate | -0.0 | -0.1 | -0.2 | -0.3 | -0.3 | -0.3 | -0.3 | -0.2 | -0.2 | -0.1 | 0.1 | 0.3 |
| 3mtCP,3mtTB Spr | -1.4 | -0.5 | -0.3 | -0.3 | 0.0 | 0.1 | -0.3 | -0.5 | -0.5 | -0.9 | -1.1 | -1.5 |
| 10yrTB,1yrTB Spr | -0.1 | -0.0 | -0.0 | 0.1 | 0.1 | -0.0 | -0.0 | -0.1 | -0.2 | -0.4 | -0.3 | -0.0 |
| Trend | 3.5 | 3.7 | 3.8 | 3.9 | 3.8 | 3.7 | 3.8 | 3.9 | 3.7 | 3.8 | 3.8 | 3.9 |
