State Coincident Indicators Slipping – The Large Image

I’m coming out of guide depart to share this single information level that snuck out over the vacations: The Federal Reserve Financial institution of Philadelphia’s State Coincident Indicators for November 2023.

I just like the SCI – its broad, constant, and doesn’t function with too massive of a lag.

Over the previous three months, the indexes elevated in 25 states, decreased in 21 states, and remained secure in 4, for a three-month diffusion index of 8. Evaluate this with the identical interval one yr in the past, when the coincident indexes elevated in 30 states, decreased in 13 states, and remained secure in seven, for a one-month diffusion index of 34.

To drastically over-simplify the SCI: 8 extra states at the moment are contracting now (extra orange/yellow) versus a yr in the past; 5 fewer states are increasing at this time (much less blue/inexperienced) than similar 3 month interval in 2022:
 
State Coincident Indicators 1 12 months In the past versus Right now

 
I watch this to see how shut we’re to falling right into a recession, and to get an thought of when the FOMC shall be pressured to acknowledge the influence of their open market rate of interest handiwork.

It is a modest change, and sure not sufficient to push the Fed to behave instantly. But when it will get a lot worse, it might drive their hand. If this continues to decelerate, the FOMC could be chopping charges within the first half of the yr. If November was a blip, and we see extra growth and fewer contraction, then it’s the again half of the yr or later.

I’ll maintain monitoring this every month…

Supply:
State Coincident Indexes: Launch
The Federal Reserve Financial institution of Philadelphia, December 29, 2023

Beforehand:
State Coincident Indicators: November 2022 (January 4, 2023)

Indicators of Softening (July 29, 2022)

Why Recessions Matter to Traders (July 11, 2022)

__________

1: The State Coincident Indicators are composed of 4 state-level variables: 1) Nonfarm payroll employment; 2) Common hours labored in manufacturing by manufacturing staff; 3) Unemployment price; and 4) Wage and wage disbursements deflated by the patron worth index.