"I love Are we in a recession?"

2022-06-21 18:12:33

Nope!We are not in a recession :) What does the CFNAI say? Are we in a recession? "We" in this case only refers to the United States (for now, because data is easy to get). While there are many definitions for what constitutes a recession, the Chicago Federal Reserve Bank National Activity Index (CFNAI) is a good monthly indicator, which represents current economic activity, where past recessions periods have coincided with its three-month moving average falling below -0.7. Using this moving average, we see: We are not in a recession. How close are we to a recession? Using a basic logistic regression on the monthly CFNAI indicator's underlying components (85 factors rolling up into production/income, consumption/housing, employment, and sales), we can estimate a probability of currently being in a recession. Using that: We are not in a recession, with a probability of 95 percent. What about past trends? Adding time lags to independent variables as far as 12 months ago, we can attempt to capture some trends instead of just deciding from today's values.This shows: We are currently not in a recession with a probability of 99 percent. How likely is a future recession? While we can't predict the future, we know what the events leading up to past recessions looked like. By adding a forward lag to past recession periods, we can try to estimate the probability of a recession happening at any point in the next 12 months. Result: Imminent recession is unlikely, with a probability of 85 percent. Data source: Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis. Last updated: 2022-06-21 10:00:47