Note: With the release of this morning's Consumer Price Index, we've updated this commentary to include the Real Retail Sales data for March.
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:
- Nonfarm Employment
- Industrial Production
- Real Retail Sales
- Real Personal Income (excluding Transfer Receipts)
The Latest Indicator Data
Nominal Retail Sales in March declined 0.3%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, declined -0.4% month-over-month ( -0.39% to two decimal places). The chart below gives us a close look at the monthly data points in this series since the end of the last recession in mid-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 explanation, but following the subsequent recovery, Real Sales have remained below trend. In fact, this indicator has hovered around a flat line for the past nine months.
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 US economy has been slow in recovering from the Great Recession, and the overall picture has been a mixed bag for well over a year and counting. Employment and Income have been relatively strong. Real Retail Sales have essentially gone nowhere for the past nine months, and Industrial Production has essentially been in a recession.
The chart below illustrates the average of the Big Four percent is off its all-time high. The post-recession recovery peaked in November 2014, eighteen months ago.
