Our Business Cycle Indicator was revised lower after heavy truck sales for February came in much lower than initial estimates. Partially offsetting the decline was the decline in weekly jobless claims. Fewer people filing for unemployment insurance is a good thing.
The revision moves our Business Cycle Indicator down to -0.18 from near zero last week. While this is a meaningful move lower, it should not set off any alarm bells. Importantly, the direction of the indicator has not changed – it’s still moving higher. However, this new data shows that the bounce that we saw off the December 2018 lows was not as good as previously thought.
The chart below shows where our indicator was prior to this weeks’ revised data.
Our thesis remains that the slowdown in the economy is likely a growth scare, not the end of this business cycle. However, that view can change as we get more data. For example, one has to consider the recent inversion of the yield curve which typically occurs prior to recessions. Our Business Cycle Indicator use the yield curve as one of its six components.
Regardless, we will be watching incoming data closely to see if the recent economic weakness abates or something more troubling is indeed brewing.