The Experimental Index of Coincident Indicators (XCI) rose to 238.3 in December 1999 from 237.7 in November and 236.8 in October, based on the most recently available data. Over the three months from September to December, the XCI grew 5.4% at an annual rate, while during the three months from June to September, the XCI grew 1.9% at an annual rate. Over the six months from June to December, the XCI grew 3.6% at an annual rate.
The Experimental Leading Index (XLI) for December is 3.4. 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 December to June 2000. Because XCI growth has averaged approximately 3% annually since 1960, the December XLI forecasts growth slightly above 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 4% in December, indicating a 4% probability that the economy will be in a recession in June 2000.
Of the indicators used to calculate the XLI, three made a positive contribution to the index, relative to trend: housing authorizations (building permits); manufacturers' unfilled orders; and exchange rates. Four of the indicators made negative contributions to the index, relative to trend: part-time employment due to slack work; 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 6% probability that the economy will be in a recession in June 2000, slightly higher than the XRI.
Figure 4 shows the probability that the economy will be in a recession during each of the months from December 1999 to June 2000, 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 1%, the probability of being in a recession in January is 1%, and the probability of being in a recession in June is 4%. Based on the variables in the XRI-2, the probability that the economy was in a recession in December is 1%, the probability of being in a recession in January is 1%, and the probability of being in a recession in June 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) | 3.4 |
| Experimental Recession Index (XRI) | 4 % |
| Experimental Coincident Index (XCI) | 238.3 |
| 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 | 0.2 |
| 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 | -0.7 |
| Interest spread: 10-year minus 1-year Treasury bonds | -0.1 |
| Trend | 3.9 |
| 99:11 | 99:10 | 99:09 | 99:08 | 99:07 | 99:06 | 99:05 | 99:04 | 99:03 | 99:02 | 99:01 | 98:12 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| XLI | 2.8 | 2.7 | 1.8 | 3.1 | 3.3 | 3.0 | 2.8 | 2.1 | 1.8 | 3.4 | 4.2 | 3.6 |
| XRI | 6 % | 7 % | 13 % | 5 % | 4 % | 4 % | 3 % | 3 % | 6 % | 4 % | 4 % | 6 % |
| XCI | 237.7 | 236.8 | 235.2 | 235.4 | 234.8 | 234.1 | 232.7 | 232.0 | 231.8 | 231.1 | 229.9 | 229.5 |
| XRI-2 | 6 % | 6 % | 7 % | 6 % | 7 % | 7 % | 10 % | 12 % | 7 % | 4 % | 4 % | 5 % |
| Components of the Experimental Leading Index | ||||||||||||
| Housing BP | 0.3 | -0.3 | -0.7 | 0.3 | 0.4 | 0.0 | -0.9 | -1.1 | -0.2 | 0.7 | 1.1 | 0.7 |
| MD Unf Ord | -0.1 | -0.3 | 0.0 | -0.0 | -0.1 | -0.1 | -0.0 | -0.1 | -0.3 | -0.0 | 0.1 | -0.3 |
| Exchange Rates | 0.4 | 0.4 | 0.0 | -0.2 | -0.2 | -0.1 | -0.3 | -0.2 | 0.1 | 0.1 | 0.3 | 0.7 |
| Part Time Wk. | -0.3 | 0.0 | 0.2 | -0.2 | -0.2 | -0.3 | 0.1 | -0.2 | -1.1 | -0.8 | -0.3 | 0.1 |
| 10yr TBond Rate | -0.1 | -0.1 | -0.0 | -0.1 | -0.2 | -0.3 | -0.3 | -0.3 | -0.3 | -0.2 | -0.2 | -0.1 |
| 3mtCP,3mtTB Spr | -1.1 | -1.2 | -1.4 | -0.5 | -0.3 | -0.3 | 0.0 | 0.1 | -0.3 | -0.5 | -0.5 | -0.9 |
| 10yrTB,1yrTB Spr | -0.2 | -0.1 | -0.1 | -0.0 | -0.0 | 0.1 | 0.1 | -0.0 | -0.0 | -0.1 | -0.2 | -0.4 |
| Trend | 3.9 | 4.2 | 3.8 | 3.9 | 3.9 | 4.0 | 4.0 | 3.8 | 3.9 | 4.0 | 3.9 | 3.9 |
