Coming Recession? This Indicator Suggests That…

Figure 1 plots BCIp, BCI, BCIg and the S&P 500 together with the thresholds (red lines) that need to be crossed to be able to call a recession.

The BCI uses the below-listed economic data and combines the components for the index in “real time,” i.e., the data is only incorporated into the index at its publication date:

1. 10-year Treasury yield (daily)
2. 3-month Treasury bill yield (daily)
3. S&P 500 (daily)
4. Continued Claims Seasonally Adjusted (weekly)
5. All Employees: Total Private Industries (monthly)
6. New houses for sale (monthly)
7. New houses sold (monthly)

Figure 2 plots the history of BCI, BCIg and the LOG (S&P 500) since July 1967.

Figure 3 plots the history of BCIp, i.e., 46 years of history, which includes 7 recessions, each of which the BCIg and BCIp managed to indicate timely; the weeks leading to a recession are indicated on the plots.

Conclusion

 The Business Cycle Index is far from signaling a recession.

Editor’s Note:  The above excerpts from the original article by Georg Vrba have been edited ([ ]) and abridged (…) for the sake of clarity and brevity.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.