How to judge whether the US economy is in recession? These 15 indicators can be used as a reference

Original title: "How to judge the US economic recession? Please accept these 15 key indicators"

Original author: Arthur Wang, BlockTempo

In the eyes of many observers, the US economy does not seem to have entered a recession, and it may even avoid this fate. For example, Treasury Secretary Yellen said in her sharing last weekend: The United States has basically achieved a soft landing.

However, the warning signs of a series of well-known economic indicators are also constantly sounding the alarm. The following dynamic zone has sorted out 15 recession-related indicators for you. It is recommended that you observe and analyze these indicators from multiple angles to obtain a more comprehensive understanding of the economic situation.

1. Inverted U.S. Treasury yield curve

Since July 2022, the 10-year Treasury yield has finally been higher than the 2-year Treasury yield, which means that the longest inversion record in history has finally been lifted after 793 days.

However, the United States has experienced five economic recessions since the 1980s, and there have been yield inversions before. This inevitably makes the market begin to worry whether history will repeat itself this time, such as the AI bubble burst?

Source: Finance M Square

2. Leading indicators of the Conference Board

The Conference Board's Leading Economic Indicators (LEI) cover multiple areas, including manufacturing activity, confidence index and consumer confidence. Although the indicator was in recession for most of 2022 and 2023, it has rebounded, but it still remains at a warning level, indicating the potential risk of economic slowdown.

3. Non-agricultural employment data

In the past few economic recessions, this indicator usually turned negative first, followed by a rapid rise in the unemployment rate. Although the current unemployment rate remains at a relatively low level, if the number of non-agricultural employment drops sharply, it is necessary to pay close attention to changes in the unemployment rate.

4. Sam's Rule Recession Indicator

This indicator proposed by Fed economist Sam points out that when the three-month moving average of the unemployment rate exceeds the previous year's low of 0.5%, it means that the economy is in recession.

Although the index has reached 0.53% so far, Sam previously believed that this time it might not necessarily enter a recession, but he also said that the situation has become more severe.

V. Consumer Confidence Index

The Consumer Confidence Index reflects consumers' views on the economic outlook. Low consumer confidence usually indicates a reduction in consumer spending, which in turn affects economic growth. Since consumption accounts for 70% of the US GDP, the data released by the Conference Board and the University of Michigan are very useful for reference.

VI. Manufacturing PMI (Purchasing Managers Index)

The PMI index is an important indicator for measuring the health of the manufacturing industry. Values below 50 usually indicate a slowdown in the economy. The Institute for Supply Management in the United States conducts monthly surveys covering multiple indicators such as new orders, production, and employment, which are crucial to judging the economic situation.

VII. Personal Consumption Expenditures (PCE)

PCE is an important component of the U.S. economy. Its decline usually indicates the risk of recession. As consumer spending decreases, economic growth will be suppressed.

VIII. Capital Expenditures

A reduction in corporate investment in equipment and construction is usually an early signal of an economic slowdown. The major Fed's estimates of future capital expenditures can provide clues about corporate investment trends.

Observing that the future capital expenditures of the various Feds are at a high point, it reflects that companies still have production momentum. When capital expenditures decline and client inventory replenishment occurs, it can be noted that the valuation of the S&P 500 manufacturing-related sectors may be revised.

IX. Bank loan growth rate

A decrease in bank loans may indicate a decline in corporate and consumer demand, which will directly affect economic activities. Changes in the credit cycle are often a precursor to an economic recession.

As the economy enters its final stage of growth, concerns about overcapacity and policy tightening pressure begin to affect companies. Even if they see a rebound in terminal demand, companies will become conservative in their attitudes toward investment spending such as factory expansion until the credit cycle eventually enters a recession.

X. Optimus Index

This indicator is based on the sales of heavy trucks and is related to forward-looking corporate investment. It can effectively predict economic trends. If the indicator shows a decline, it may mean a slowdown in economic activity.

When economic conditions deteriorate, companies will be the first to feel it and cut back on spending and purchases. Therefore, in the past five cycles, the index has led the US economy to a recession. When the economy improves, the purchase of trucks will pick up in sync.

The reversal time of the "Optimus Prime Index" has been more than one year ahead of the S&P 500 in the past 40 years, making it a very special leading indicator.

Eleven, Atlanta Federal Reserve Bank GDP Forecast Model (GDPNow)

This model combines a variety of economic data to predict US GDP growth. If the GDPNow model predicts a slowdown in growth, it may indicate the risk of a recession.

XII. OECD US Composite Leading Index

An index below 100 usually indicates that economic activity is below potential, which may indicate the risk of recession. This indicator can reflect the overall trend of the global economy.

OECD US Composite Leading Index

XIII. Chicago Federal Reserve National Activity Index (CFNAI)

CFNAI is calculated through 85 different monthly indicators. When it is negative for several consecutive months, it may indicate the risk of recession.

Chicago Federal Reserve National Activity Index (CFNAI)

Fourteen. Philadelphia Federal Reserve SPF Recession Indicator

This indicator is based on a survey of professional forecasters and predicts the probability of negative GDP growth in the future. If the probability increases significantly, it may mean an increase in the risk of economic recession.

Philadelphia Federal Reserve SPF Recession Indicator

Fifteen, Single-family New Home Market Index (HMI) and Building Permits Data

These indicators are directly related to the real estate market. If the index falls, it may reflect the weakening of consumer confidence and the possibility of a future economic recession.

Single-family New Home Market Index (HMI)

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