This graphic is from the 5-Min. Forecast (here).
This begs the question: Strong rebound to what? The FRB Chicago National Activity has rebounded to the area that is near the low for the previous two recessions. Does this mean that it is predicting the return to a level of GDP similar to the bottom of other recessions?
I would say, based on the data displayed, that what happens next for GDP will correlate to what happens next for the index. Duh!! If the index continues upward, the outlook for GDP is constructive. But, coming out of the last two recessions, the initial spike in the index was followed by backing and filling. GDP stayed below the index curve for the entire period shown except for 1998 1nd 1999. Thus, what we see thus far could be interpreted as consistent with a GDP growth rate in the range of 0 to 1%.
One factor worth mentioning is that the index turned up while GDP growth was still going down. The two previous recessions saw both turn up at the same time once a recovery was underway. In the 2001 recession, there was a double bottom in the index when the initial advance occurred while GDP growth continued down. Such an occurrence now would have much more draconian psychological impact than the small fluctuations in the 2001 recession.
Watch the relationship between Chicago Fed National Economic Activity Index and GDP growth closely. It is a most intriguing correlative relationship. The relationship is not tracking very exactly what has occurred in the two prior recessions. If there is no index decline in the coming months, a unique pattern will be established, differing from what occurred in 1990-91 and 2001.
