Browsing Posts tagged Federal Reserve Bank of Philadelphia

Leading Indicators vs November 2014 – Easynomics Court

For an explanation on “Easynomics Court” and how it works, read this page on leading indicators vs six months into the future.

NOTE: In case you are accessing this post long after it was originally posted, you may also be interested in the most recent Easynomics Court case.

As of today, the official Easynomics Court conviction record for categorizing the growth level six months into the future is:

  • 15 – Guilty (Win)
  • 10 – Not Guilty (Loss)
  • Conviction Rate = 60 percent

NOTE: A random guess would yield the correct result only 33 percent of the time, so the leading indicators are definitely worth noting.


Leading Indicators from May 2014

Charges Filed: “The Leading Indicators hereby charge that November 2014 shall be a POSITIVE month, as indicated by a positive annualized growth rate at or faster than the historical average of 3.3 percent.”

Exhibit A – e-Forecasting Leading Economic Indicator (eLEI) | NEUTRAL

In the six months leading up to May 2014, the e-Forecasting eLEI rose at an annualized rate of about 2.8 percent.  This is consistent with growth that is positive but slower than historically average rates over the next six months or so.

Easy Description: e-Forecasting.com has many useful tools for tracking the economy.  Their Leading Economic Indicator (eLEI) is a proprietary model to predict the direction of the economy several months in advance.  The concept is similar to The Conference Board’s LEI does.  Many people believe this is a good leading indicator for the economy, and there is some very good work that validates that.

Easynomics Rating Methodology: I will calculate the change in the eLEI over the six months leading up to the month the “charges” are being filed.  I will convert that change into an annualized rate.  If the annualized rate is less than zero, I will issue a “negative” rating – 3.3 percent or higher will be “positive” – anything in between will be “neutral.”  NOTE: I will use the first available data for the month where possible – i.e., I won’t use revised data – this way, I’m simulating what the leading indicators really believe at the time they are released.

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State By State Economy – Philadelphia Fed Index for Every U.S. State (thru May 2014)

A state by state economy analysis is provided by the Federal Reserve Bank of Philadelphia each month.  How’s your state doing?  I’d love to hear about it in the comments section.

NOTE: You may be reading an outdated analysis.  Please visit my latest state by state economy analysis for more info.

On this site, I share a lot of indices that tell us how things are going in the country – for example, my weekly economic indicators roundup.  But what each of you feels is much more related to what’s happening in your specific state.  Wouldn’t it be great if there were an economic index we could follow that tracked exactly that?  Fortunately, that’s what the Federal Reserve Bank of Philadelphia does on a monthly basis, providing us a look at the state by state economy.

They produce a “Coincident State Index” that combines several different economic factors into one number.  This basically tracks the current rate of GDP (measure of all economic output) growth (or contraction if it’s negative) for the state.  The other index is a “Leading State Index” that combines several different leading indicators to predict the annualized pace at which the Coincident State Index will be growing over the next six months.

Philadelphia Fed State Coincident Indexes

Look at the chart below to see how fast each state’s GDP is growing right now.  It’s color-coded, so the green colors mean the state’s economy is growing (the darker the better), and the red colors mean the state’s economy is shrinking (the darker the worse).  Blue indicates essentially no change.

State By State Economy - Philadelphia Fed State Coincident Indexes May 2014

Source: PhiladelphiaFed.org

 

Philadelphia Fed State Leading Indexes

Look at the chart below to see how fast each state’s Coincident Index is expected to grow over the next six months.  This is NOT actually an annualized growth rate over the next 6 months, which means you should roughly double it to estimate what its annual growth rate would be.  It’s color-coded, so blue is the best, and the green colors mean the state’s economy is expected to grow (the darker the better), and the red colors mean the state’s economy is expected to shrink (the darker the worse). continue reading…

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Leading Indicators vs October 2014 – Easynomics Court

For an explanation on “Easynomics Court” and how it works, read this page on leading indicators vs six months into the future.

NOTE: In case you are accessing this post long after it was originally posted, you may also be interested in the most recent Easynomics Court case.

As of today, the official Easynomics Court conviction record for categorizing the growth level six months into the future is:

  • 14 – Guilty (Win)
  • 10 – Not Guilty (Loss)
  • Conviction Rate = 58 percent

NOTE: A random guess would yield the correct result only 33 percent of the time, so the leading indicators are definitely worth noting.


Leading Indicators from April 2014

Charges Filed: “The Leading Indicators hereby charge that October 2014 shall be a POSITIVE month, as indicated by a positive annualized growth rate at or faster than the historical average of 3.3 percent.”

Exhibit A – e-Forecasting Leading Economic Indicator (eLEI) | POSITIVE

In the six months leading up to April 2014, the e-Forecasting eLEI rose at an annualized rate of about 5.1 percent.  This is consistent with growth that is at or faster than historically average rates over the next six months or so.

Easy Description: e-Forecasting.com has many useful tools for tracking the economy.  Their Leading Economic Indicator (eLEI) is a proprietary model to predict the direction of the economy several months in advance.  The concept is similar to The Conference Board’s LEI does.  Many people believe this is a good leading indicator for the economy, and there is some very good work that validates that.

Easynomics Rating Methodology: I will calculate the change in the eLEI over the six months leading up to the month the “charges” are being filed.  I will convert that change into an annualized rate.  If the annualized rate is less than zero, I will issue a “negative” rating – 3.3 percent or higher will be “positive” – anything in between will be “neutral.”  NOTE: I will use the first available data for the month where possible – i.e., I won’t use revised data – this way, I’m simulating what the leading indicators really believe at the time they are released.

continue reading…

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State By State Economy – Philadelphia Fed Index for Every U.S. State (thru April 2014)

A state by state economy analysis is provided by the Federal Reserve Bank of Philadelphia each month.  How’s your state doing?  I’d love to hear about it in the comments section.

NOTE: You may be reading an outdated analysis.  Please visit my latest state by state economy analysis for more info.

On this site, I share a lot of indices that tell us how things are going in the country – for example, my weekly economic indicators roundup.  But what each of you feels is much more related to what’s happening in your specific state.  Wouldn’t it be great if there were an economic index we could follow that tracked exactly that?  Fortunately, that’s what the Federal Reserve Bank of Philadelphia does on a monthly basis, providing us a look at the state by state economy.

They produce a “Coincident State Index” that combines several different economic factors into one number.  This basically tracks the current rate of GDP (measure of all economic output) growth (or contraction if it’s negative) for the state.  The other index is a “Leading State Index” that combines several different leading indicators to predict the annualized pace at which the Coincident State Index will be growing over the next six months.

Philadelphia Fed State Coincident Indexes

Look at the chart below to see how fast each state’s GDP is growing right now.  It’s color-coded, so the green colors mean the state’s economy is growing (the darker the better), and the red colors mean the state’s economy is shrinking (the darker the worse).  Blue indicates essentially no change.

State By State Economy - Philadelphia Fed State Coincident Indexes April 2014

Source: PhiladelphiaFed.org

 

Philadelphia Fed State Leading Indexes

Look at the chart below to see how fast each state’s Coincident Index is expected to grow over the next six months.  This is NOT actually an annualized growth rate over the next 6 months, which means you should roughly double it to estimate what its annual growth rate would be.  It’s color-coded, so blue is the best, and the green colors mean the state’s economy is expected to grow (the darker the better), and the red colors mean the state’s economy is expected to shrink (the darker the worse). continue reading…

Share

Leading Indicators vs September 2014 – Easynomics Court

For an explanation on “Easynomics Court” and how it works, read this page on leading indicators vs six months into the future.

NOTE: In case you are accessing this post long after it was originally posted, you may also be interested in the most recent Easynomics Court case.

As of today, the official Easynomics Court conviction record for categorizing the growth level six months into the future is:

  • 14 – Guilty (Win)
  • 9 – Not Guilty (Loss)
  • Conviction Rate = 61 percent

NOTE: A random guess would yield the correct result only 33 percent of the time, so the leading indicators are definitely worth noting.


Leading Indicators from March 2014

Charges Filed: “The Leading Indicators hereby charge that September 2014 shall be a POSITIVE month, as indicated by a positive annualized growth rate at or faster than the historical average of 3.3 percent.”

Exhibit A – e-Forecasting Leading Economic Indicator (eLEI) | POSITIVE

In the six months leading up to March 2014, the e-Forecasting eLEI rose at an annualized rate of about 4.1 percent.  This is consistent with growth that is at or faster than historically average rates over the next six months or so.

Easy Description: e-Forecasting.com has many useful tools for tracking the economy.  Their Leading Economic Indicator (eLEI) is a proprietary model to predict the direction of the economy several months in advance.  The concept is similar to The Conference Board’s LEI does.  Many people believe this is a good leading indicator for the economy, and there is some very good work that validates that.

Easynomics Rating Methodology: I will calculate the change in the eLEI over the six months leading up to the month the “charges” are being filed.  I will convert that change into an annualized rate.  If the annualized rate is less than zero, I will issue a “negative” rating – 3.3 percent or higher will be “positive” – anything in between will be “neutral.”  NOTE: I will use the first available data for the month where possible – i.e., I won’t use revised data – this way, I’m simulating what the leading indicators really believe at the time they are released.

continue reading…

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Leading Indicators – Easy Pod (May 9, 2014)

Leading indicators are in the business of predicting the future, so they’re definitely worth discussing.  I’m continuing a feature I’m calling “Easy Pod” – a collection of indicators that help portray the current status of something.  In this post, that something is leading indicators, which are indicators that help us determine where the economy will be a few months from now.  Let’s first review quickly what leading indicators are and why they matter. (If you’ve read this Easy Pod before, skip down to below the first horizontal line.)

NOTE: You may be reading an outdated article.  You may be interested in reading my latest Leading Indicators Easy Pod.

Quick ‘n Easy

Leading indicators are indicators that tend to predict what will happen several months down the road.  The “leading” refers to the fact that the indicators will often change in a particular direction before the actual economic situation catches up.

From Wikipedia (I know, I know, but they had the best definition!):

Leading indicators are indicators that usually change before the economy as a whole changes.  They are therefore useful as short-term predictors of the economy.

Sure it’s great to know what the GDP for last quarter was or how much consumers spent last month.  But those all give us a sense for what’s happening right now.  When I want to make decisions (like how to invest my money, whether to put off a purchase, etc.) I need to know about the future.  That’s why we are interested in leading indicators, a set of magic numbers that tell us exactly where the economy will be in about 6 months, with 100% certainty.  OK, so that’s not entirely true.  Actually, it’s totally a lie.  But the point is that these indicators are much more correlated (that’s a fancy term for things that happen together) with the future state of the economy than other indicators are.

There are a number of indicators that do this, and there are even some people who combine these indicators into one number (an index) to give a summary.  In this “Easy Pod” I will take a look at a few of those indices that I like to follow.  Check back regularly for updates.

 


Quick Summary

Previous Easy Pod: July 19, 2013

Indicator (Click for details – only works if full article is open) Current Rating (change vs last Easy Pod)
Leading Economic Index (The Conference Board) Positive
Daily Consumer Leading Indicators Negative
OECD Composite Leading Indicators Neutral
Federal Reserve Bank of Philadelphia Leading Index Neutral




Indicator: Leading Economic Index   |   POSITIVE
Easy Intro: None yet  |  Leading Economic Index – The Conference Board – Click here  |  Latest Date This Info Represents: March 2014

Quick ‘n Easy

An index that combines the results of ten leading indicators into one number suggests that the pace of economic growth through September 2014 will be positive, at or above the historical average rate.  The report shows that 7 of the 10 components were positive contributors for the latest month, which saw the index rise 0.8 percent versus the previous month.

Leading Economic Index US - The Conference Board - March 2014

Source: Conference-Board.org

Easy Description: Basically, this index from The Conference Board is a combination of several indicators that traditionally correlate well to the future state of the economy, generally 6-9 months ahead.  For simplicity, we won’t talk about all the indicators that it combines.  You can read about it yourself by clicking on the source link above.

From The Conference Board’s website:

The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle.

We’re singling out the “leading” part of their index.  They have other indices that tell us how things are now (coincident) and how they have been (lagging).

When this index declines in value by about 1-2% over several months, and during that time most of the individual components of the index are declining, that is a pretty good sign that a recession is coming soon.

Latest Reading: The latest reading of the Leading Economic Index is 100.9, which is 0.8 percent higher than the previous month.  The index is now 2.7 percent higher over the last six months, which translates to an annualized rate of about 5.6 percent.  During that time, 7 of the 10 components have improved.  In the latest month, 7 out of 10 components that make up this index were better than the previous month (although not necessarily a “positive” contributor for the month).  For the latest month, the biggest source of positive contribution in any single component came from the difference between 10-year Treasury yield and the federal funds rate (“interest rate spread”) – but this is artificially affected by the Federal Reserve’s lowering of interest rates, and so it may be overly optimistic.  The previous month’s most positive component was the same.  The worst component for the latest month is building permits, which are an indication of upcoming construction of new houses.  This has been a bit up and down over the last six months.

Implications: I like to look at components that go from very good to very bad or vice versa versus three months prior, which I’ll assign a threshold value of +0.10 and -0.10 for simplicity.

Versus three months ago:

  • Changed from very bad to very good (-0.10 or worse to +0.10 or better)
    • Weekly jobless claims
  • Changed from very good to very bad (+0.10 or better to -0.10 or worse)
    • None

Once again, one of the single largest contributors (1st place this month) is the “Interest Rate Spread.”  Unfortunately, this has to do with the Federal Reserve’s interventions (reducing interest rates).  Normally, better interest rate spreads are true leading indicators, but not so much when their presence is largely “artificial” to some degree.  This has consistently remained a positive contributing component.  The economists from The Conference Board indicated that the index is suggesting the accelerated growth in the U.S. economy through the spring and summer.

Easynomics Rating Methodology: For this index, I will calculate the change in the LEI over the recent six months.  I will convert that change into an annualized rate.  If the annualized rate is less than zero, I will issue a “negative” rating – 3.3 percent or higher will be “positive” – anything in between will be “neutral.”
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