April 2023 Recession Monitor Charts

April 2023

Safe zone
Nearing threshold
Threshold crossed

Early Warning Signs

Current reading for six early indicators of recessions, sorted by typical lead time (earliest → latest)

Indicator

Type

Threshold

Typical Lead

Latest Reading

Indicator Description

Conference Board: Consumer Expectations – Present Situation Spread

Consumer Activity

Spread < -30

(3rd straight month)

12 – 36

months

-83

The spread between the two major components of the Conference Board’s Consumer Confidence Index. A wider spread between these components has been shown to reliably lead downturns with a long lead.

The Yield Curve:

10 Year – 2 Year Spread

Financial

10 year - 2 year

spread < 0

("Inverted")

12 – 24

months

-38

bps*

The 2y-10y yield curve is the spread between short-term and long-term government bond yields. When short-term yields rise above long-term yields, it shows that investors are increasingly worried about the near-term health of the economy and a recession is likely close.

NAHB Housing Market Index

Housing

Y/Y ∆ < -15%

(3rd straight month)

6 – 18

months

-44%

An index that measures homebuilder sentiment. The housing sector has been shown to reliably lead broader downturns in the U.S. economy.

Elkhart Employment

Labor Market

Y/Y ∆ < -3.0%

6 – 12

months

-3.4%

Elkhart, Indiana comprises more than 65% of the recreational vehicle (RV) industry. Since big-ticket items like RVs are among the first goods consumers pull back on, the RV industry is particularly sensitive to downturns in consumer activity.

Consumer Activity

Conference Board

Leading Economic Index (LEI)

General

Y/Y ∆ < 0%

6 – 12

months

-6.5%

A composite index tracking the entire U.S. economy. This index is a “catch-all” indicator that offers a broad assessment of national economic growth.

NFIB Capex Plans Index

Business Activity

Y/Y ∆ < -5.0%

3 – 12

months

-22%

An index derived from a survey of hundreds of U.S. small businesses regarding their plans and expectations in the coming months. The “plans to make capital expenditures” sub-index has historically been a reliable recession indicator.

*After turning red, an indicator will remain red until it maintains above its recession threshold for the duration of its lead time.
Safe zone
Nearing threshold
Threshold crossed

Imminent Signals

Current reading for six imminent indicators of recessions, sorted by typical lead time (earliest → latest)

Indicator

Type

Threshold

Typical Lead

Latest Reading

Indicator Description

Housing Starts

÷

Jobless Claims

Housing


3MMA Y/Y ∆

< -20%


3-12

months


-16%


Housing starts are a leading indicator and jobless claims are lagging. A coincident-lagging ratio acts as a leading indicator because as an expansion peaks the coincident indicator will be rising more slowly than the lagging.

Labor Market


C&I Loan Delinquency Rate

Financial


Q/Q ∆ > 0%

(2nd straight quarter)


0 – 9

months


-6 pp


Delinquencies on C&I Loans are effective in measuring business financial health. When delinquencies rise, it signals that businesses are facing broad deterioration in economic conditions.

Business Activity


Capacity Utilization

Business Activity


M/M ∆ < 0%

(3rd straight month)


0 – 6

months


-0.1 pp


Capacity Utilization is the percent of capacity in mining, manufacturing, and utilities that is currently being used. Although secular decline in its composite industries makes it an imperfect recession indicator, consistent declines in a short period are cause for worry.

Industrial Activity

Consumer Confidence

÷

Unemployment Rate

Consumer


Y/Y ∆ 3MMA

< -6%


0 – 6

months


6.8%

Consumer Confidence is a coincident indicator while the unemployment rate is lagging. A coincident-lagging ratio acts as a leading indicator because as an expansion peaks the coincident indicator will be rising more slowly than the lagging.

Labor Market

University of Michigan: Household Durable Goods Purchasing Sentiment Index

Consumer Activity

Y/Y ∆ 3MMA

< -10%


0 – 3

months


6.3%

An index measuring consumers’ feelings about whether it is a good time to purchase large household durable goods. This is an area of spending that consumers tend to cut first when the economy sours.


Chicago Business Barometer

General


Index <45

(2nd straight month)


Coincident


43.6


A diffusion index measuring general economic activity in the Chicago area. The index has a proven track record of leading broader shifts in business cycles in the U.S.

*After turning red, an indicator will remain red until it maintains above its recession threshold for the duration of its lead time.