by Bill McBride on 11/19/2014 09:00:00 PM
Wednesday, November 19, 2014
Goldman Sachs has a model that divides the business cycle into four stages: early-cycle, mid-cycle, late-cycle and recession. According to Goldman economist Kris Dawsey, the economy appears to be transitioning from early to mid-cycle (but not late-cycle or worse):
The likelihood of the economy showing late-cycle behavior or being in recession by the middle of 2015 is very low, according to the model. However, we expect a transition from early- to mid-cycle over the next half year. ... since early 2010 the model has characterized the economy as "early-cycle." This reflects the high degree of slack, a solid growth rate of activity, subdued inflationary pressure, and financial market outcomes consistent with an easy stance of monetary policy. ... Over the past year, the signal strength has declined considerably, showing that the choice between early- and mid-cycle has become more difficult. While mid-cycle behavior is qualitatively similar in many ways to early-cycle behavior, key differences include (1) smaller output and employment gaps, (2) slightly firmer inflation outcomes, (3) a trough in credit spreads and stock market volatility, and (4) a higher fed funds rate and related flattening in the yield curve led by the front end.Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 281 thousand from 290 thousand.
• Also at 8:30 AM, the Consumer Price Index for October. The consensus is for a 0.1% decrease in CPI in October, and for core CPI to increase 0.1%.
• At 10:00 AM, Existing Home Sales for October from the National Association of Realtors (NAR). The consensus is for sales of 5.15 million on seasonally adjusted annual rate (SAAR) basis. Sales in September were at a 5.17 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.31 million SAAR.
• Also at 10:00 AM, the Philly Fed manufacturing survey for November. The consensus is for a reading of 18.5, down from 20.7 last month (above zero indicates expansion).