A Little Followed Indicator Hints At Recession

Everyday we are bombarded by a inflow of economic data from which we try and make assessments about the future direction of the economy.  One indicator that doesn't get much attention at all from the press is the Aruoba-Diebold-Scotti Business Condition Index.   This index is published by the Philadelphia Federal Reserve and from their website :

"The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying (seasonally adjusted) economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data. Both the ADS index and this web page are updated as data on the index's underlying components are released.

The average value of the ADS index is zero. Progressively bigger positive values indicate progressively better-than-average conditions, whereas progressively more negative values indicate progressively worse-than-average conditions. The ADS index may be used to compare business conditions at different times. A value of -3.0, for example, would indicate business conditions significantly worse than at any time in either the 1990-91 or the 2001 recession, during which the ADS index never dropped below -2.0"

As opposed to many of the other economic indicators that are used to try and distinguish the trend of the economy - this is a composite index of stock data and economic indicators that are observed at mixed frequencies and compiled on a DAILY basis ...