CFNAI Revisions and Recessions
The 2008 Great Recession shows that data was revised upwards before the CFNAI-MA3 recession trigger was tripped, and revised downwards after the real-time recession trigger was tripped. Revisions to the 85 economic data series before the recession made no impact on the models' recession dating accuracy. Note that in this recession, the model produced a real-time lag of 3 months (2 months on the chart plus the 1 month data publish lag)
We notice a similar story for the 2001 recession, with subsequent data revisions on the 85 economic data components being upwards prior to the recession trigger being tripped and downwards thereafter.
The lack of any leading indicator confirmation on the weakness of the CFNAI-MA3 (which is effectively a co-incident indicator) coupled with evidence that the last two recessions resulted in UPWARD revisions as opposed to downward ones prior to the recession trigger means we should not be hitting any panic buttons just yet.
Dwaine van Vuuren is CEO of RecessionALERT.com, a provider of investment research. If you would like to receive the next 4 weeks Recession Reports for free, just email us at firstname.lastname@example.org with FREE FORECAST AP3 in the subject line.