A link to a recent article about applications of the new mixed-frequency approach (systems of daily real-time indicators discussed in my previous entries): Advanced computation for intelligent investment.
Yesterday’s entry 1 was entitled “Possible end of the slowdown in industrial production ahead”. It was released slightly ahead of the January INDPRO number which, according to the Board of Governors , “increased 0.9 percent in January after decreasing 0.7 percent in December”. Neat forecast! Or was it by chance? Let me try to put that event into a broader forecast/nowcast context.
In my previous entry 1 I reported “evidences for a stabilization of the recent INDPRO-dynamics (end of deceleration)”. Because the release time point of the February INDPRO-figure is approaching I wanted to check the latest indicator values (data up to February 16) of our daily INDPRO-system:
In the bottom graph we can observe that
- the fast indicators (brown/green lines) reverted trend-growth and are now weakly upward-sloping and that
- the gap between the slower q-t-q designs (quarter-to-quarter growth) and the faster m-t-m (month-to-month growth) indicators has been closed (brown crossed blue line from below) or is narrowing (green approaches red line).
This pattern is typical/indicative for a relaxation of the recent slowdown in the industrial production index.
PS: do not confuse the above INDPRO-system and the GDP-system posted in 2.
“based on historical relationships, the recent declines in equity valuations indicate that we are currently in a situation of somewhat heightened risk of a recession – but at this time it is in a gray area that does yet outright indicate a recession compared to what has been observed historically”.
I provided an analysis of the current state of the business-cycle in my previous entry (briefly: the industry sector is subject to contraction, but there is only weak evidence that the sector-dynamics have spread over the whole economy, as of now). Temptingly, in this entry, I’d like to revert the (Granger-) causality implied by John’s statement: instead of inferring recession-probabilities from financial data, I’d like to suggest asset-management opportunities obtained from (macro-) economic indicators.
- After reader-feedback I here provide the daily indicator series (designs 1-4) for further analysis: indicator_system.txt (the series start in April 1997).
If today marked the onset of a recession, then this event would be at odds with the historical track with respect to
- oil prices (low)
- interest rates (low)
- job creation (high)
A constellation unseen before. But each recession is different. So: what does the data tell us, right now, about the eventual onset of an `at odds’ recession? Continue reading
In yesterday’s entry 1 I posted a new daily indicator. I deliberately overemphasized the business-cycle in its design. What does this mean, you may ask? The following graph compares yesterday’s indicator, blue line, with a (new daily) `neutral’ indicator, red line, which tracks `growth’ of the industrial production series (the business-cycle is not overemphasized):
Growth as measured by the `neutral’ indicator is not negative, yet. Continue reading
I noticed, recently, worries about the possibility of an up-coming recession in the US, see 1 (and the accompanying puzzle 2). It’s been a long time since my last entry on the topic… Sufficient time, indeed, for the business-cycle to eventually complete. And sufficient time for me to work on a new mixed-frequency extension of the MDFA, 3. As fruit of these efforts let me here share today’s up-date of the new daily real-time indicator. Continue reading