Skip to main content

Tracking Recent Levels of Financial Stress - October

10.16.14

Advisory: This article is based in whole or in part on the CFSI (Cleveland Financial Stress Indicator), an indicator that was discontinued by the Federal Reserve Bank of Cleveland in 2016 due to the discovery of errors in the indicator’s construction. These errors overestimated stress in the real estate and securitization markets. As a result, readers should be cautious and interpret any analysis based on CFSI data with those errors in mind.

The Cleveland Financial Stress Index (CFSI) fluctuated between grades 1 and 2 throughout the third quarter of 2014. As of October 9, the index stood at −0.426, which is 3.599 standard deviations below the historical high in December 2008 and 1.707 standard deviations above the historical low in January 2014. The index is down 0.072 standard deviations from this time last year.

Figure 1: Cleveland Financial Stress Index

As the quarter progressed, increasing contributions of the real estate and securitization markets were offset by decreasing contributions of the foreign exchange market. As stock price indexes approached historic highs in late August and early September, the equity market’s contribution to stress declined. The CFSI’s credit and funding markets remained relatively stable over the quarter.

Figure 2: Average Stress-Level Contributions of Component Markets to CFSI

The Cleveland Financial Stress Index and all of its accompanying data are posted to the Federal Reserve Bank of Cleveland’s website at 3 pm daily. For a brief overview of how the index is constructed see this page. The CFSI and its components are also available on FRED (Federal Reserve Economic Data), a service of the Federal Reserve Bank of St. Louis. FRED allows users to download, graph, and track more than 200,000 data series.

Headlines

  • Semiconductor Shortages and Vehicle Production and Prices

    Pawel Krolikowski Kristoph Naggert

    Vehicle production has fallen since the beginning of the pandemic recession. We investigate reasons for this decline. Manufacturers in this industry cite insufficient materials, including a lack of semiconductors, as increasingly responsible. Demand seems to be less of an issue. In fact, demand has been strong, and together with accelerating prices and sharply declining inventories, it suggests an insufficient supply of new cars. Our best guess is that the materials shortages and their effects on new car prices will subside within the next six to nine months. Read More

  • Why Has Durable Goods Spending Been So Strong during the COVID-19 Pandemic?

    Kristen Tauber Willem Van Zandweghe

    Consumers increased their purchases of durable goods notably during the COVID-19 pandemic. The pandemic may have lifted the demand for durable goods directly, by shifting consumer preferences away from services toward a variety of durable goods. It may also have stimulated spending on durable goods indirectly, by prompting a strong fiscal policy response that raised disposable income. We estimate the historical relationship between durable goods spending and income and find that income gains in 2020 accounted for about half of the increase in durable goods spending, indicating that the direct and indirect effects of the pandemic on durable goods spending were about equally important. Read More

  • Why Wasn’t there a Nonbank Mortgage Servicer Liquidity Crisis?

    Lara Loewenstein

    In March 2020, in the early days of the COVID-19 pandemic, many were concerned about the liquidity of nonbank mortgage servicers. As it turned out, the vast majority of these servicers did not face a liquidity crisis. In this Commentary I detail the reasons why, including lower than expected take up rates of forbearance, the role played by mortgage origination income, and the actions taken by the government-sponsored enterprises, Ginnie Mae, and housing agencies. Read More

Upcoming EventsSEE ALL