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Our twelve leading indicators of business-cycle conditions have improved somewhat since the beginning of the year but they still point to recession.
The percentage of leading indicators appraised as expanding (an index that reflects the judgments of AIER's research staff) increased to 44, up from 33 last month. When less than 50 percent are expanding, a recession is probable. In January, however, this percentage was a much lower 25. AIER's Percentage of Leading Indicators Expanding: 44 Percent Our cyclical score (which is based on a separate, purely mathematical analysis of the same leading indicators) also increased. It now stands at 50 -- signalling that the economy is as likely to continue growing as it is to contract. This score, too, is well above the low it reached a few months ago. AIER's Cyclical Score: 50 Percent The mixed signals sent by both of our leading indexes -- they are trending upward but still in recession territory -- suggest the outlook for the economy is highly uncertain. Moreover, our data do not yet fully reflect the impact of soaring energy prices. Gasoline prices rose another 34 cents in May alone, and since the beginning of the year they have increased by 32 percent. This and ongoing fallout from the housing market suggest the economy is highly vulnerable to further deterioration. For a more in-depth analysis, please see the latest issue of Research Reports (subscription required). For a description of our methodology and a list of the economic indicators we use, click here.
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