US Economic Indicators: Leading & Coincident Indicators

US Economic Indicators: Leading & Coincident Indicators November 20, 2017 Dr. Edward Yardeni 516-972-7683 eyardeni@ Debbie Johnson 4-664-1333 djohnson@ Please visit our sites at www. blog. thinking outside the box

Table Of Contents Table Of Contents Leading & Coincident Indicators 1 Lagging Indicators 2 Coincident Indicators 3 Coincident & Leading Indicators 4 Components of Leading Economic Indicators 5 Components of Coincident Economic Indictors 6 Resource Utilization & Corporate Profit Margin 7-9 November 20, 2017 / Leading & Coincident Indicators www.

1 1 Figure 1. Leading & Coincident Indicators LEADING & COINCIDENT ECONOMIC INDICATORS (2010=, sa, ratio scale) 1 1 LEI CEI 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 1.4 Figure 2. RATIO LEADING TO COINCIDENT ECONOMIC INDICATORS 1.4 1.3 1.3 1.1 1.1 1.0 1.0.9 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21.9 Note: Shaded areas denote recessions according to the National Bureau of Economic Research Page 1 / November 20, 2017 / Leading & Coincident Indicators www.

1 1 Figure 3. LAGGING ECONOMIC INDICATORS (2010=), ratio scale Lagging Indicators 1 1 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 Figure 4. RATIO LAGGING TO COINCIDENT ECONOMIC INDICATORS 1.1 1.1 1.0 1.0.9 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21.9 Note: Shaded areas denote recessions according to the National Bureau of Economic Research Page 2 / November 20, 2017 / Leading & Coincident Indicators www.

Figure 5. Coincident Indicators COINCIDENT ECONOMIC INDICATORS: RECOVERIES & EXPANSIONS* (2010=, sa, ratio scale) 33 Months 2/01-11/03 68 Months 1/08-10/13 19 Months 10/69-5/71 32 Months 11/73-7/76 25 Months 8/81-9/83 23 Months 7/-6/92 Months 5/71-11/73 61 Months 7/76-8/81 82 Months 9/83-7/ 104 Months 6/92-2/01 Months 11/03-1/08 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 * Red horizontal lines span cyclical peaks through subsequent cyclical recoveries. Green horizontal lines are expansion periods following recoveries. Source: Conference Board, Haver Analytics, and YRI calculations. Figure 6. COINCIDENT INDICATORS (2010=, sa ratio scale) 24 106 36 58 12 92 73 58 62 64 66 68 72 74 76 78 82 84 86 88 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 Numbers above time line reflect number of months of expansion. Source: Bureau of Economic Analysis. Page 3 / November 20, 2017 / Leading & Coincident Indicators www.

15 Figure 7. Coincident & Leading Indicators REAL GDP & COINCIDENT ECONOMIC INDICATORS (yearly percent change) 15 10 CEI (1.9) Real GDP (2.3) 10 5 5 0 0-5 -5-10 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21-10 Source: Bureau of Economic Analysis and Conference Board. 25 20 Figure 8. REAL GDP & LEADING ECONOMIC INDICATORS (yearly percent change) 25 20 15 15 10 10 5 0 Q3 5 0-5 -5-10 -15 LEI (5.2) Real GDP (2.3) -10-15 -20-20 -25 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21-25 Page 4 / November 20, 2017 / Leading & Coincident Indicators www.

43 42 41 39 Figure 9. Components of Leading Economic Indicators COMPONENTS OF LEADING ECONOMIC INDICATORS Average Workweek (hours, sa) Building Permits (million units, saar) 2.8 2.4 2.0 1.6.8.4 0 0 0 0 0 200 Jobless Claims (thousands, sa) Average of Conference Board & University of Michigan Expectations Indexes (normalized index).4.2.0 -.2 -.4 -.6 -.8-1.0 175 1 Consumer Goods Orders (billions of 1982 dollars, sa) S&P 0 Composite Price Index (1941-43=10, nsa) 20 20 2000 10 125 0 0 0 20 ISM New Orders Index (+=increasing, sa) Leading Credit Index (normalized index, percent) 15 10 5 0-5 57 51 45 39 33 27 Nondefense Capital Goods Orders Excluding Aircraft (billions of 1982 dollars, sa) Interest Rate Spread (basis points, nsa) 0 0 200 0-200 Page 5 / November 20, 2017 / Leading & Coincident Indicators www.

1 1 1 Figure 10. Components of Coincident Economic Indictors COMPONENTS OF COINCIDENT ECONOMIC INDICATORS (ratio scale) Payroll Employment (millions, sa) 1 1 1 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 15.5 13.5 11.5 9.5 7.5 5.5 15.5 13.5 11.5 9.5 7.5 5.5 3.5 Real Personal Income Less Transfer Payments (trillion 2005 dollars, saar) 3.5 1.5 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 1.5 10 10 0 0 0 0 10 10 0 0 0 0 0 Manufacturing & Trade Sales (billion 2005 dollars) 0 200 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 200 1 1 Industrial Production 2012=, sa 20 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 20 Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Census Bureau, and Federal Reserve Board. Page 6 / November 20, 2017 / Leading & Coincident Indicators www.

95 Resource Utilization & Corporate Profit Margin Figure 11. LEI/CEI vs. RESOURCE UTILIZATION RATE LEI/CEI Resource Utilization Rate* 1.4 1.3 85 1.1 1.0 75 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21.9 * Average of all industries capacity utilization rate and employment rate, i.e., percentage of labor force that is employed. Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve Board, and Conference Board. 12 Figure 12. CORPORATE PROFITS MARGIN IN GDP* & LEI/CEI (after-tax profits as a percent of nominal GDP) 1.4 10 1.3 Q2 8 6 1.1 4 Profit Margin* 1.0 2 LEI/CEI 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21.9 * After-tax profits reported to IRS (excluding Inventory Valuation Adjustment and Capital Consumption Adjustment). Source: Bureau of Economic Analysis, Bureau of Labor Statistics, and Conference Board. Page 7 / November 20, 2017 / Leading & Coincident Indicators www.

1 Resource Utilization & Corporate Profit Margin Figure 13. LEADING ECONOMIC INDICATORS 11/10 1 1 1 ECRI Weekly Leading Index (1992=, 4-wa) Conference Board LEI (2010=) 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 Source: Conference Board and Economic Cycle Research Institute (ECRI). 200 1 Figure 14. LEADING ECONOMIC INDICATORS 11/4 200 1 1 1 YRI Weekly Leading Index* (1992=, 4-wa) 1 1 Conference Board LEI (2010=) 86 87 88 89 91 92 93 94 95 96 97 98 99 20 21 22 * Average of Consumer Comfort Index (which is a four-week average) and the four-week average of Boom-Bust Barometer, which is CRB raw industrials spot price index (weekly average) divided by weekly initial unemployment claims. Source: Bloomberg, Commodity Research Bureau, and Bureau of Labor Statistics. Page 8 / November 20, 2017 / Leading & Coincident Indicators www.

200 Resource Utilization & Corporate Profit Margin Figure 15. YRI vs ECRI WEEKLY LEADING INDEX 1 1 1 YRI Weekly Leading Index* ECRI Weekly Leading Index (1992=) 11/4 145 1 135 1 1 125 115 105 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 * Average of Consumer Comfort Index (which is a four-week average) and the four-week average of Boom-Bust Barometer, which is CRB raw industrials spot price index (weekly average) divided by weekly initial unemployment claims. Source: Bloomberg, Commodity Research Bureau, Bureau of Labor Statistics, and Economic Cycle Research Institute (ECRI). Figure 16. COINCIDENT ECONOMIC INDICATORS (2010=, sa, ratio scale) 1984 Continental Illinois 19 S&L Crisis 1994 Mexican Peso 1997 Pacific Rim 2001 9/11 Attacks 2007 Subprime Meltdown 19 Penn Central 1974 Franklin National 1987 Black Monday 2000 Tech Bubble 1998 Russia & LTCM 2008 Lehman & AIG 19 Silver Bubble 1982 Drysdale & Mexico 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 Note: Shaded areas denote recessions according to the National Bureau of Economic Research Page 9 / November 20, 2017 / Leading & Coincident Indicators www.

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