Source: Philadelphia Fed.
The August figures in the context of previous vintages, and forecasts, are shown below:
Figure 1: Kansas coincident index, June vintage (dark blue), July vintage (red), August vintage (black); December 2016 and January 2017 values are implied by leading indices; all on log scale. Source: Philadelphia Fed and author’s calculations.
While the July index value has been revised upward by 0.3 percent (log terms), the trajectory of economic activity remains largely unchanged.
This downturn is all the more remarkable given the improvement in the drought conditions.
Figure 2: Kansas Palmer Drought Severity Index (blue, left log scale), log Kansas coincident index (black, right scale, 2016M05=0), log civilian employment (red, right scale, 2016M05=0). Source: NOAA, Philadelphia Fed, BLS, and author’s calculations.
For those who are concerned that the Philadelphia Fed’s coincident index misrepresents economic activity in Kansas (despite the fact that the correlation between state GDP and coincident indices is between 0.55-0.70, according to the Philadelphia Fed), I’ve included reported civilian employment; that too has collapsed since its most recent peak: about 2% (log terms) in the space of five months.
And that recovery in drought conditions is from an overall worsening trend.
Figure 3: Kansas Palmer Drought Severity Index (blue), and Nearest Neighbor (LOESS) fit, bandwidth=0.7 (red). Down indicates greater drought conditions. Quarterly data average of monthly data. Light tan shading for period 2011Q1-2014Q2. Source: NOAA, author’s calculations.
Since about 1998, the trend has been toward lower values of the PDSI.
Update, 9/25, 4pm Pacific: