Dr. Ed Seifred's Economic Presentation
We invited Dr. Edmond J. Seifried, a nationally recognized economic advisor, to present at MGM Springfield on Thursday, September 27th, and he confirmed that two of three economic indicators show a recession is not on its way. Though the third indicator says otherwise, it is offset by a lack of inflation in the country, which he attributes to low-cost goods from other countries, the increased use of technology—rather than wage-earning employees—and innovations such as Uber, which replaced high-priced taxis.
Seifried explained the significance of the three following early-warning indicators: the composite leading index, the ISM manufacturing index or the PMI index, and yield curves.
The composite leading index, the most important of the three factors, has predicted recessions since World War II, Seifried said. Based on indicators such as the quantity of building permits and orders on consumer goods, the index paints a picture of overall economic health.
So long as the number rises month after month, he said, the economy will remain intact within one year. By contrast, if the figure falls for three consecutive months, a recession is sure to come, he said. Seifried, who has been tracking the composite leading index for 50 years, said the figure has increased every month this year.
The ISM manufacturing index indicates that manufacturing is growing if the figure is above 50, and that a recession could be coming if it is below 42.7. Seifried said the figure has not dropped below 57.3 this year. By comparison, the value was 33.1 during the 2008 recession.
However, the yield curve, which indicates when short-term investments are more valuable than long-term ones, does indicate a recession could be coming. Because inflation is low, though, and the use of technology has allowed companies to keep costs—and thus, prices, low—he disregards the evidence raised by the yield curve.
Seifried offered the financially-minded audience a bit of advice, recommending software called GDPNow, a new tool for business executives. He also had high praise for Florence Bank, congratulating current customers for their choice and encouraging others to do business with the bank.
Seifried is an educator for community bank directors, CEOs, senior management, and up-and-coming community bankers, and is a board member at Limestone Bank, a community bank based in Louisville, Kentucky. He is professor emeritus of economics and business at Lafayette College, and formerly served as dean for the West Virginia Banking School and the Virginia School of Banking. Most recently, Seifried became the executive director of the Sheshunoff Affiliation Program, which provides high-performance education and idea exchanges for community bank CEOs, lenders, and technology/operations officers.