The Milwaukee Company Economic Index (“MCEI”) is currently indicating that the economy is in a “Neutral” phase. An MCEI reading of Neutral is consistent with a healthy economy that is increasing at an average rate of growth, and stable stock market returns.
The Chicago Fed National Activity Index (“CFNAI”) three-month moving average currently sits at -0.18, which is below the Fed’s “likelihood of an expansion” threshold of 0.2 yet still above the Fed’s “likelihood of a contraction” threshold of -0.7. Additionally, The Milwaukee Company’s probit model of various economic indicators shows the economy is growing at a “Stable” rate.
MCEI uses a combination of the Chicago Federal Reserve’s National Activity Index’s (“CFNAI”) three-month moving average, and a probit model of leading economic indicators, to gauge the stage of the economic cycle in real time. It is our belief that the use of a probit model to confirm CFNAI’s readings delivers a more accurate forecast.
The table below illustrates how MCEI determines the current state of the economic cycle: