Last updated on 11/04/2017

On this page we track Coincident Economic Indicators, which increase or decrease in phase with the GDP. As time progresses I will gradually increase the number and scope of these indicators, while maintaining them as best I can.  Most of the data will come from the Federal Reserve Economic Database, with some others originating at other sources such as the U.S. Treasury Department. This page is under construction. Please excuse the construction debris!

In what follows we will classify any coincident indicator that indicates a currently worsening economy as bearish, any indicator that indicates an economy close to its peak as neutral, and any that indicates a currently growing economy as bullish. Just as with the leading indicators, we will count up each indicator’s score according to the following scheme: Bearish = -1, Neutral = 0, Bullish = +1.

Indicator Indication Score
St. Louis Fed. Reserve Bank Coincident Index Bullish +1
Real GDP growth rate Bullish +1
Number of employees on non-agricultural payrolls Bullish +1
Personal income less transfer payments Bullish +1
Retail Sales Bullish +1

Of the six coincident economic indicators I have displayed and am counting, I see the following distribution.

Bearish: 0
Neutral: 0
Bullish: 5

for a net score of +5 Bullish.



Coincident Economic Activity Index for the U.S.:

The St. Louis Federal Reserve Bank’s Coincident Economic Activity Index for the U.S., which is graphed versus time below, is a weighted average of the following components.

  • Employees on nonagricultural payrolls
  • Personal income less transfer payments in 1972 dollars
  • Index of industrial production
  • Manufacturing and trade sales in 1972 dollars

This index is updated monthly.

Federal Reserve Coincident Index of U.S. economic activity

Federal Reserve Coincident Index of U.S. economic activity
Image Credit: St. Louis Federal Reserve District Bank / FRED

Although this index is continuing to rise, its rate of increase is clearly declining. Nevertheless, it is still rising, so it must be rated as bullish.



Real GDP growth rate:

Updated quarterly.

US real GDP growth from Q1 2009 to Q3 2017. The green line is a linear fit to the GDP over the three years from Q1 2014 to Q1 2017.

US real GDP growth from Q1 2009 to Q3 2017. The green line is a linear fit to the GDP over the three years from Q1 2014 to Q1 2017.
Image Credit: St. Louis Federal Reserve District Bank / FRED

The GDP growth for the first quarter of 2017 was 1.2%, while for the second and third quarters it was 3.1% and 3.0% respectively. The last time we had two consecutive quarters with growth at or above 3.0% was three years ago. This indicator is definitely bullish.



Number of employees on non-agricultural payrolls:

Updated monthly.

Non-Farm Employees

Non-Farm Employees
Image Credit: St. Louis Federal Reserve District Bank / FRED

The total number of non-farm employees is continuously increasing, although as with the coincident index of economic activity, the rate of increase is steadily declining on average. Nevertheless, it is still increasing with time, so it must be rated bullish.



Personal income less Transfer payments:

Updated monthly.

Percent change in personal income less current transfer payments

Percent change in personal income less current transfer payments. The heavy green line is the linear trend over the last two years of Obama’s administration, while the heavy red line is the trend from the start of the Trump administration.
Image Credit: St. Louis Federal Reserve District Bank / FRED

The real income of most people is finally beginning to increase again. This is a marvelous bullish indicator.



Retail Sales:

Updated monthly.

Retail Sales excluding food services

Retail Sales excluding food services
Image Credit: St. Louis Federal Reserve District Bank / FRED

This index increased sharply in the fourth quarter of 2016 and immediately after Donald Trump was elected president. There was then a decrease in the rate of increase from February of 2017 until June 2017. The rate of increase then accelerated again. In September 2017 it was increasing year-over-year at a rate of 4.69%. I rate this index as bullish.



 

The Average Monthly Change of the Labor Market Conditions Index (LMCI):

 

Alas, the Federal Reserve has discontinued following the monthly change in the Labor Market Conditions Index as of August 3, 2017. Their explanation was the following:

The Board decided to stop updating the LMCI because they believe it no longer provides a good summary of changes in U.S. labor market conditions. Specifically, model estimates turned out to be more sensitive to the detrending procedure than expected, the measurement of some indicators in recent years has changed in ways that significantly degraded their signal content, and including average hourly earnings as an indicator did not provide a meaningful link between labor market conditions and wage growth.

I am undecided as to what, if anything, I should use in its place.

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