Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.
There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:
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The Latest Indicator Data
With yesterday’s release of CPI data for March, we can now calculate Real Retail Sales. As the adjacent chart shows, this indicator has recovered from its December-January slump and has now hit a record high. The real series was up 0.94% in March and 2.21% year-over-year. As we can see in the YoY chart in the appendix below, the downward trend since early 2011 hit a trough (so far) in January, but the increases in February and March are perhaps signaling a trend reversal. Time will tell.Â
The latest Industrial Production data includes the Fed’s extensive annual revisions published at the end of last month. The March month-over-month increase of 0.7% beat the Investing.com forecast of 0.5%, and the February MoM was revised upward from 0.6% to a whopping 1.2%. The Fed report explains: “The rise in February was higher than previously reported primarily because of stronger gains for durable goods manufacturing and for mining. For the first quarter as a whole, industrial production moved up at an annual rate of 4.4 percent, just slightly slower than in the fourth quarter of 2013.”
The chart and table below illustrate the performance of the Big Four with an overlay of a simple average of the four since the end of the Great Recession. The data points show the cumulative percent change from a zero starting point for June 2009. We now have three of the four indicator updates for the 57th month following the recession. With one data point left for March, the Big Four Average (gray line below) is showing the two strongest advances of the past twelve months.
