March 24, 2023

CFNAI on the Putative Recession of 2022H1

Concerning the view the United States economy was in recession previously this year (e.g., this observer less than a month back), the CFNAI has the following takes:

The three month moving average of the CFNAI dropped below 0 (i.e., dropped below pattern growth) in May and June. The notes for the CFNAI indicate “Following a period of financial expansion, an increasing likelihood of a recession has actually historically been associated with a CFNAI-MA3 value below– 0.70.” The CFNAI-MA3 did not breach this threshold.
When it comes to the signs from the variety of indications increasing or falling (i.e., a diffusion index), we have the following image.

From the notes:

This entry was published on November 22, 2022 by Menzie Chinn.

The CFNAI Diffusion Index represents the three-month moving average of the sum of the outright values of the weights for the hidden signs whose contribution to the CFNAI is positive in a provided month less the amount of the outright worths of the weights for those indicators whose contribution is unfavorable or neutral in a provided month. Periods of financial expansion have traditionally been associated with worths of the CFNAI Diffusion Index above– 0.35.

So, I (still) do not see a recession in 2022H1

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