RQA Economic charts

RQA’s Economic Index combines dozens of economic leading indicators and explanatory variables into a single standardized composite in order to assess the big picture of U.S. economic growth trends over time.

In constructing the Index, the data series for each constituent indicator is transformed so that values above zero indicate a standardized statistical measure of growth, while values below zero indicate statistical measures of economic contraction. These standardized measures are then combined and averaged to create the RQA Economic Index. Some examples of the indicators we use include:

  • U.S. Employment & Labor Data – such as non-farm payrolls, initial unemployment claims, and average weekly hours worked by the U.S. labor force;

  • Measures of Economic Activity – including ISM’s Manufacturing & Non-Manufacturing Indexes, industrial production figures, registrations of new building permits, and real manufacturing and trade industry sales; and

  • Other Market-based Data – including the infamous yield curve, changes in corporate bond spreads, and even annual returns in the stock market itself.

Disclaimer: The RQA Economic Index should not be used as the sole determining factor for investment-related decisions. Additionally, there is no guarantee that the index will produce the same predictive results or recessionary warnings in the future, and the construction and methodologies behind the index may be subject to revisions over time.

U.S. Economic Output & Activity measures

U.S. Employment & Labor Measures

U.S. Money Supply & Inflation Measures

Measures of Financial Stress

Measures of Consumer Income & Spending

Key Interest Rates & Spreads

Major Market Indices

Sources: St. Louis Federal Reserve; Bureau of Labor Statistics; Norgate Premium Data; Quandl, Inc. Calculations and analysis by RQA. Annual % Change is calculated as the year-over-year percentage change for each reported data point in the series.

Glossary

RQA Economic Index: A proprietary index created by Richmond Quantitative Advisors, LLC (“RQA”). It represents an aggregation of a variety of data points that have been determined by RQA to act as economic leading indicators or market-based explanatory variables. When combined, the aggregate index of indicators seeks to provide a single measure for estimating the current state and potential near-term trend of the U.S. economy.

Real Gross Domestic Product (Real GDP): The inflation adjusted value of the goods and services produced by labor and property located in the United States.

Industrial Production: An economic indicator that measures real output for all facilities participating in manufacturing, mining, and electric and gas utilities located within the United States (excluding those in U.S. territories).

ISM Manufacturing Index: A monthly composite index produced by the Institute for Supply Management (ISM) based on surveys of executives at industrial companies and designed to provide a reading on the change in manufacturing industry sentiment on a monthly basis. (Also referred to as the ISM Manufacturing PMI.)

ISM Services Index: A monthly composite index produced by the Institute for Supply Management (ISM) based on surveys of executives at non-industrial companies and designed to provide a reading on the change in non-manufacturing or services sentiment on a monthly basis. (Also referred to as the ISM Services PMI, and previously referenced as the ISM Non-Manufacturing Index, or NMI.)

Residential Permits: A reported count of new privately-owned housing units authorized in permit-issuing locations.

Non-Farm Payrolls: A measure of the number of U.S. workers in the economy that excludes proprietors, private household employees, unpaid volunteers, farm employees, and the unincorporated self-employed. This measure accounts for approximately 80 percent of the workers who contribute to Gross Domestic Product (GDP).

Initial Unemployment Claims (“Initial Claims”): An aggregate measure of initial unemployment benefit claims in the United States. An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claim requests a determination of basic eligibility for the Unemployment Insurance program.

Employment-to-Population Ratio: A measure of the number of people employed against the total working-age population. Unlike the unemployment rate, the employment-to-population ratio includes unemployed people not looking for jobs.

Average Weekly Hours Worked: A measure of the average hours per U.S. worker for which pay was received.

RQA Labor Market Index: A proprietary index created by Richmond Quantitative Advisors, LLC (“RQA”). It represents a normalized compilation of various labor and wage related data points. The index seeks to provide a single measure for estimating the current state and potential near-term trends underlying the U.S. labor market.

Consumer Price Index (CPI): A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Personal Consumption Expenditures (PCE): A measure calculated by the Bureau of Economic Analysis of the change in value of goods and services purchased by people in the U.S. and shown on a year-over-year basis.

U.S. Monetary Base: The total amount of U.S. dollars that are either in general circulation in the hands of the public or in the form of commercial bank deposits held at in the U.S. Federal Reserve system.

U.S. M2 Money Supply: A calculation of the money supply that includes cash and checking deposits (M1), along with near money instruments such as savings deposits, money market securities, mutual funds, and other time deposits.

Financial Stress Index (Kansas City Fed & St. Louis Fed): Monthly measures of the stress in the U.S. financial markets based on numerous variables, such as changing interest rates, yield spreads, and various other indicators, as calculated respectively by the Federal Reserve Banks of Kansas City and St. Louis.

Real Personal Income ex. Transfer Receipts: A measure of personal incomes that is net of current transfer receipts and deflated using the Personal Consumption Expenditure Price Index (PCEPI). (Note: Current transfer receipts reflect benefits or payments received for no direct services performed. They include social security, Medicare & Medicaid, unemployment assistance, and a wide range of other benefits, mostly from government payors and major insurance providers.)

Retail Sales Index: A measure of the purchases of durable and non-durable goods over a defined period of time adjusted for inflation using the Consumer Price Index.

University of Michigan Consumer Sentiment Index: A a consumer confidence index based on a survey conducted and published monthly by the University of Michigan.

RQA Consumer Spending Index: A proprietary index created by Richmond Quantitative Advisors, LLC (“RQA”). It represents a normalized compilation of various data points relating to consumer spending. The index seeks to provide a single measure for estimating the current state and potential near-term trends underlying U.S. consumption and consumer spending.

U.S. Treasury & Fed Funds Rates: Constant maturity interest rates offered by U.S. Treasury debt instruments and the Federal Funds Rate, which is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight.

U.S. Treasury & Corporate Bond Spreads: Calculated rate differences (i.e. yield spreads) between stated constant maturity rates on U.S. Treasury debt instruments and corporate bond instruments based on their Moody’s credit rating.

S&P 500 Index: A stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States.

U.S. Dollar Index (USDX): An index measure of the value of the U.S. dollar relative to a basket of foreign currencies.

WTI Crude: West Texas Intermediate crude oil spot prices.

RQA Aggregated Commodities Index: An internally calculated index by RQA that concatenates a continuous value series for a basket of global commodities. The concatenated series is constructed through the combination of the Invesco DB Commodity Index Tracking Fund, the Bloomberg Commodity Total Return Index, and Continuous Commodity Index futures.

Disclaimer: All information, analyses, and research contained herein is for informational purposes only and is not: i) for trading or investing purposes, or ii) a solicitation to offer investment advice or services. All opinions expressed are as of the date of publication and subject to change. RQA and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.

The RQA Economic Index (the “Index”) is a proprietary index created by Richmond Quantitative Advisors, LLC (“RQA”). The Index is not an investable product. It represents an aggregation of various economic data points and leading indicators, including economic output, economic activity, and employment indicators, along with a number of other fundamental and market-based data and explanatory variables. All indicators employed in the Index are unadjusted and based on first-release data points as provided by the sources listed above. All data adjustments posted following the first release dates are ignored for data integrity purposes and the goal of eliminating hindsight biases in the Index and across RQA’s economic forecasting efforts. (Note: Only data used in the Index is unadjusted and based on first-release data points. All other data and charts depicted above may or may not be adjusted based on post-dated reconciling adjustments from the data source providers or their affiliates.) The Index is designed to track varying degrees of fundamental growth within the U.S. economy by analyzing recent trends in the reported data. When investing, there are multiple factors to consider. The RQA Economic Index should not be used as the sole determining factor for investment-related decisions. Additionally, there is no guarantee that the Index will produce the same predictive results or recessionary warnings in the future, and the construction and methodologies behind the Index may be subject to change.