Inquiring minds are looking at a series of graphs on the Business Conditions Index as determined by the Philadelphia Fed.

The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP).

Business Conditions 1960-03-01 Thru 2010-01-02

Click on any chart for a sharper image.

Ignoring brief spikes, sustained dips below -1 are consistent with an economy in recession. Here is a closer look of the Business Conditions Index since 2000.

Business Conditions Data

Note: We construct the ADS Index using the latest data available as of January 8, 2010. All indicators except for Initial Claims are in annualized growth rates. We plot the negative of Initial Claims shown on the right scale.

Manufacturing and trade sales, personal income, and industrial production are positive, while payroll employment is negative.

My friend “BC” writes …

The index is back to the Jan. ’08 level when the price of oil had nearly doubled yoy, as today, with real GDP growing at 2-2.5% yoy and decelerating into recession. The 50 DMA has again crossed back below the 200 DMA on the last day of ’09, without the 200 DMA ever crossing up through zero.

In Jan. ’08, CPI was accelerating above 4% yoy (probably 3% now).

The SPX had just begun to turn negative yoy (+25% today).

The ECRI WLI was in the 130s (as today) but by then the growth rate was negative (+24% today) and “forecasting” recession (after it had already started).

One cannot conclude that the Philly Index is suggesting a double dip here, but it bears watching to see if the index drops from the -0.45 level to -1.0 or lower in the weeks ahead. Easy yoy comparisons abound for most economic data series going into Q1.

Mike “Mish” Shedlock
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