Note from dshort: This commentary has been updated to include the March data for Real Retail Sales.
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.
There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:
- Industrial Production
- Real Personal Income (excluding Transfer Receipts)
- Nonfarm Employment
- Real Retail Sales
The Latest Indicator Data
Real Retail Sales: Retail Sales rose 0.86% in March after three months of decline. Inflation adjustment trims the month-over-month gain to 0.63%. The chart below gives us a close look at the monthly data points in this series 2009. The linear regression helps us identify variance from the trend.
Now that we have data for the first quarter of 2015, we can calculate the compounded annual rate of change, the method preferred by the BEA for quarterly GDP. Here's a look at that calculation for Nominal Retail Sales. Q1 at -5.0% is lowest since the last recession. Only three data points in the current series, which dates from 1992, have been lower.
Inflation adjustment gives us a more balanced ratio of positive and negative data points. Even so, Q1 at -2.0% remains the weakest quarter since the last recession.
The Generic Big Four
The chart and table below illustrate the performance of the generic Big Four with an overlay of a simple average of the four since the end of the Great Recession. The data points show the cumulative percent change from a zero starting point for June 2009. We now have the three indicator updates for the 69th month following the recession. The Big Four Average is (gray line below).
Current Assessment and Outlook
The overall picture of the U.S. economy had been one of slow recovery from the Great Recession. We had a conspicuous downturn during the winter of 2013-2014 and subsequent rebound. And weak Retail Sales and Industrial Production in over the past four months have triggered a replay of the "severe winter" meme. Indeed, the average of these indicators in recent months suggests that the economy remains near stall speed.
