My private sector index looks ..... terrible

I've updated my composite index of private sector data sources.  They now are (equal weights):

1. The whole-economy ISM index
2. The whole-economy PMI index
3. The University of Michigan consumer sentiment index
4. The Conference Board's consumer confidence index
5. The LMI logistics index
6. ADP's monthly job change
7. Challenger's monthly job losses
8. "Jobs easy to fill", from the NFIB survey (data only through September; October values out this week)
9. "Jobs are plentiful" from the Conference Board survey

I've plotted the resulting index after extreme-adjusting it, mainly to remove the massive down-spike during the Covid Crash. 

It looks more bearish than my previous index.  In fact, it looks terrible.

[Here is my first piece about my private sector data index]

For the data nerds among you, here's the chart of the index before and after extreme-adjustment:

US consumer sentiment plunges

 The University of Michigan's consumer sentiment index has fallen almost to record lows.  It tends to lead the business cycle at the peak of the cycle, though the lead at the trough is much smaller.

The relationship isn't perfect, but it's certainly suggestive.  Given we are getting no official data on the economy, because of the government shutdown, consumer sentiment has become an important indicator.

Click on the chart to see a clearer image

Australian recovery probably OK

This chart shows YoY changes in my Australian leading and coinciding indices.  The leading index has been brought forward by 6 months, which gives us a forecast of what is likely to happen to the economy.  It suggests that economic activity is likely to accelerate.

However, my leading index is based on indicators which would normally lead recoveries and recessions.  There is no recent precedent for the damage wreaked by a trade war, and worse, by random changes in tariff levels, up one week and down the next.  These would be picked up by confidence indicators, both business and consumer.  But although consumer confidence rose sharply from 2023 lows, it has merely levelled off since January.   Business confidence is still holding up.  The most up-to-date activity indicators, the PMI series, are, so far, still rising.

Unlike the data in the US, which are already suggesting a slowdown at best and a recession at worst, Ozzie data still point to a recovery.   I'll go with that for now.

US Consumer sentiment plunges

The index of consumer sentiment from the University of Michigan has fallen to an almost 70-year record low.  Note that it has led every recession over the last 70 years, but it has given a couple of false signals.  Perhaps this is one of those occasions.  As an aside, the weakness in consumer sentiment in 2021/22/23 offers itself as a potential cause of the Democrat's election loss.  If so, that applies also to the Republican Party's electoral chances over the next couple of years.

It had been turning up from the lows caused by the rise in the Fed Funds rate and the surge in inflation, but it turned sharply down with Trump's tariff shambles.  

The data are monthly from January 1978, and quarterly before then.  The smoothing is a 3x15 centred moving average.   Shading shows US recessions.

I remain convinced that the US will soon enter a recession.