US leading indicators signal recession

For various reasons, I haven't calculated my US cyclical indices for a year or more.   But I've finally updated my US data banks and psyched myself up to do the calculations, so, here goes.

The chart below shows the year-on-year percentage change in my US coinciding and my US leading indices.  They are calculated from many underlying time series and are designed to remove some of the noise caused by the plethora of indicators which move in different directions each month, and that way to give clarity about the direction of the economy.

I have plotted my leading index with a 12-month lag.  This gives us an implicit forecast of the economy's direction over the next 12 months.  Observe how covid screwed up the lags, which is logical, because the covid crash and the recovery from covid were caused by exogenous influences, not by movements in the economy itself.

Note how the percentage change in my leading index is falling fast, suggesting that over the next 6-12 months the economy will be weak, or in recession.

The chart below compares my US coinciding index with my US diffusion index.  A diffusion index measures what percentage of a universe of monitored time series is rising.  In this case, the universe is 57 different time series, almost exclusively monthly.  When all are rising, the economy is strong.  When all are falling, it's in deep recession.  It's been smoothed using a 12-month centred moving average to iron out the monthly ebbs and flows.

It leads the cycle by about 5 months.  The unsmoothed diffusion index ticked up in November, but (a) that's based only on those data which were available, and (b) small blips in diffusion indices can be revised away as more data become available, and (c) it's just one month.  However, if this is the low for the diffusion index, it nevertheless indicates that, for at least the next 5 or 6 months, the US economy will be slowing.  

None of these indices gives pin-point timing or extent of the swings in the business cycle.  However, they do give strong rough indications of what's happening.  

My guess is that the US economy will be weak or even declining until the middle of next year.   But as I have said before, this is the first recession in my long professional experience caused by the extreme incompetence of the party and politicians in office, and by damaging policies, rather than by the strong ebbs and flows of the economy, so who knows?