Coincident Indicators Fall Again
Just as I predicted, the latest release on leading, coincident and lagging indicators included a downward revision of the March number for coincident indicators, as well as the February number. Instead of seeing a 0.2% decline in February and a 0.1%
rise in March, they fell 0.3% in February and was unchanged in March. Now they say the April number was unchanged. It seems clear however, especially with the sharp decline in industrial production that this number too will be revised down and so be negative.
Although usually ignored by the financial medua, the coincident indicators are important because they are used by NBER to determine if and when a recession has started.
I should however caution that the so-called tax rebates might give a temporary and artificial boost to one of the coincident indicators, real disposable income excluding transfer payments. To the extent the so-called rebate is treated as what it really is, a transfer payment, it won't affect these numbers. However, as some of it will be treated as a tax cut, and so boost real disposable income excluding transfer payments, this indicator will be boosted. This of course goes against the intent of this indicator, to measure market and employment based income, and so indirectly the value of production, but it will nevertheless probably be accounted for that way. This mean that this indicator, and by extension the coincident indicator index, will appear stronger than it really is. But those of you who read this blog will be able to see through it.
rise in March, they fell 0.3% in February and was unchanged in March. Now they say the April number was unchanged. It seems clear however, especially with the sharp decline in industrial production that this number too will be revised down and so be negative.
Although usually ignored by the financial medua, the coincident indicators are important because they are used by NBER to determine if and when a recession has started.
I should however caution that the so-called tax rebates might give a temporary and artificial boost to one of the coincident indicators, real disposable income excluding transfer payments. To the extent the so-called rebate is treated as what it really is, a transfer payment, it won't affect these numbers. However, as some of it will be treated as a tax cut, and so boost real disposable income excluding transfer payments, this indicator will be boosted. This of course goes against the intent of this indicator, to measure market and employment based income, and so indirectly the value of production, but it will nevertheless probably be accounted for that way. This mean that this indicator, and by extension the coincident indicator index, will appear stronger than it really is. But those of you who read this blog will be able to see through it.
posted by stefankarlsson at 9:31 PM
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