Note: This commentary has been updated to include the April 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 were flat in April (-0.001%) following the March bounce that in turn followed three months of contraction. The seasonally adjusted Consumer Price Index puts April Real Retail Sales at -0.10%. 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.
The early 2014 dip in sales was generally written off as a temporary result severe winter, and the return to trend sales growth gave credence to the explanation. The early 2015 dip triggered the same rationale. However, the real contraction in April suggests that weak consumer spending is being driven by something beyond weather.
[Read: The Misleading Read on Retail Sales]
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.
Current Assessment and Outlook
The overall picture of the US 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 recent months triggered a replay of the "severe winter" meme. However, we're now getting data points for Spring months, not the Winter, and as yet we're not seeing a rebound. Industrial Production has decline for five consecutive months and Real Retail Sales have contracted for four of the past five months.
At this point, the average of these indicators in recent months suggests that the economy remains near stall speed, and the risk of a downturn appears to have increased.
