The Foundation-Keybridge Equipment Finance Industry Recession Monitor is comprised of a mix of 12 consumer and business-oriented indicators designed to anticipate a recession. Keybridge assessed hundreds of high-frequency indicators from a variety of sources covering all segments of the U.S. economy and settled on a set of 12 that have a strong track record of independently anticipating a U.S. economic recession without an excess of false signals.
The resulting Recession Monitor contains a mix of consumer- and business-oriented indicators but is calibrated to emphasize the financial and business sectors.
The Recession Monitor will be published quarterly. The next monitor will be released in July 2020.
Current Assessment
Three out of 12 indicators in the Foundation-Keybridge Equipment Finance Industry Recession Monitor are currently red, signaling an “advisory” reading. Most indicators improved in February, and the number of “yellow” indicators fell from four to two. However, while the model’s current reading suggests that recession-like conditions in the industry are unlikely in the next six months, the economic risk posed by coronavirus is not yet reflected in the data. Given the heightened economic uncertainty resulting from the virus, indicator readings may deteriorate in March and April if the virus continues to spread and economic activity slows.
Out of the 12 recession leading indicators, three are currently red and two are yellow, suggesting that they are near their recession threshold and may turn red in the coming months if economic conditions deteriorate.
Two of the three red indicators are early warning signs, suggesting that while a recession is possible in the next 1–2 years, the risk of a near-term recession is low. The threat posed by coronavirus is a major complicating factor to this projection, however.
The Indicators
Below is a brief description and assessment of each of the 12 key indicators that make up the Equipment Finance Industry Recession Monitor. For each indicator, Keybridge identified a threshold that the indicator has historically crossed in the months immediately prior to a recession and otherwise crossed only rarely, if ever. Each indicator is assigned a color based on the indicator’s recent behavior – “green” for when the indicator is safely above (or, for certain indicators, below) its threshold, “yellow” for when the indicator is nearing its threshold, and “red” for when the indicator has crossed its threshold at least once within the period in which it typically leads a recession (e.g., within the last year). The indicators are listed in the order of their typical lead time (i.e., the amount of time that passes between when an indicator first passes its recession threshold and when the recession begins), with those providing the earliest warning listed first:
Recession Monitor: Indicator Descriptions
