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"Insensibly one begins to twist facts to suit theories, instead of theories to suit facts."        — Sherlock Holmes, A Scandal in Bohemia
Economic Indicator Charts with Baselines

The BaR Analysis Grid© uses economic indicators that correlate strongly with the ups and downs of a business cycle and show a consistent pattern of decline prior to recessions. Indicators can be divided into two groups: static and dynamic. Static indicators, like the Chicago Fed National Activity Index and the St. Louis Fed Financial Stress Index, have a consistent recession signal range, resulting in baselines that are are the same from business cycle to business cycle. Other indicators, such as retail sales and building permits, are dynamic, meaning that the indicator values and baseline estimate change with each business cycle.

The recession baselines for dynamic economic indicators are based on the values seen when previous recessions have started. During a business cycle, after an indicator hits a peak value it will decline until a recession starts. The baseline is largely based on the percentage that an indicator decreased from peak to recession start in previous business cycles.

The charts shown below are snapshots taken in June 2020. These charts show how well the baselines estimated where the indicators would be when the recession started even though this recession, due to mandated shutdowns, was very different from previous ones.
 
Building Permits
Dynamic baseline; leading indicator
Building Permits
 
Chicago Fed National Activity Index
 Static baseline
CFNAI

Consumer Sentiment
 Dynamic baseline; leading indicator
 Consumer Sentiment

Real Nonfinancial Corporate Profits
 Dynamic baseline
 Corporate Profits
 
Credit Managers' Index (National Association of Credit Managers)
Static baseline
CMI

Existing Home Sales (National Association of Realtors)
Dynamic baseline
Existing Home Sales

Industrial Production and Capacity Utilization
Dynamic baseline
Industrial Production

ISM Manufacturing
Static baseline
ISM NMI

ISM Nonmanufacturing
Static baseline
ISM PMI

Job Openings and Hires
Dynamic baseline; job openings is a leading indicator
Job Openings 

Real Retail Sales Per Capita
Dynamic baseline
Retail Sales 
 
Small Business Optimism (National Federation of Independent Business)
Dynamic baseline; leading indicator
Small Business

St. Louis Fed Financial Stress Index, Monthly Average
Static baseline; leading indicator
STLFSI

Temporary Employment
Dynamic baseline; leading indicator
Temporary Employment

Weekly Unemployment Claims, Monthly Average
Dynamic baseline; leading indicator
Unemployment

Vehicle Sales
Dynamic baseline
Vehicles Sales

Yield Curve Spread, Monthly Average (10-year Treasury notes minus 3-month Treasury bills)


Note: The yield cure spread is pushed forward 12 months when plotted on the BaR Analysis Grid. Research by the Cleveland Fed has determined that the yield curve forecasts economic growth approximately one year in advance. Go here to see the Cleveland Fed's yield curve spread forecast. However, the 12 months is an average and the actual time forecast differs for each business cycle.

Yield Curve
 

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