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ECRI Weekly Leading Index Growth at Highest Level Since July 2011

September 21, 2012

The indicators ECRI shares with the public continue to contradict the company's repeated recession forecasts, which have, for the past few months, escalated into assertions that we are already in a recession.
- Doug Short, Vice President of Research, Advisor Perspectives

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the seventh consecutive week, now at 125.4, up from last week's 124.7 (revised from 124.9). See the WLI chart below. The WLI growth indicator (WLIg) now marks its fifth week in expansion territory at 2.7 (up from last week's 1.9). It has now posted twelve consecutive weeks of improvement and is at its highest level since July 29, 2011.

The indicators ECRI shares with the public continue to contradict the company's repeated recession forecasts, which have, for the past few months, escalated into assertions that we are already in a recession.

Here is a chronology of selected interviews with Lakshman Achuthan, ECRI's chief operations officer, on Bloomberg TV since its first public recession forecast on September 30th of last year:

 

  • September 30, 2011: Recession Is "Inescapable" (link)
  • February 24, 2012: GDP Data Signals U.S. Recession (link)
  • May 9, 2012: Renewed U.S. Recession Call (link)
  • July 10, 2012: "We're in Recession Already" (link)
  • September 13, 2012: "U.S. Economy Is in a Recession" (link)


The most concise explanation of how ECRI continues to justify its recession call in light of weak but not recessionary economic data is this recent post on the company's website: The 2012 Recession: Are We There Yet? In particular this commentary explains in more detail the July claim that key economic indicators were "rolling over".

In the current cycle retail sales have already peaked back in March 2012 and, according to the household survey, employment has declined for the last two months, and for four of the last six months. Mind you, the household data is revised a lot less than the payroll jobs data and also tends to lead it a bit at cycle turns. (While the jobless rate, calculated from the same data, is yet to turn up in this cycle, that is mostly due to people dropping out of the labor force.) 

Since July, when we highlighted the weakness in personal income growth, there have been revisions showing even weaker income growth going back a few months, followed by some apparent recovery recently. As with some of the other coincident data, this series will come under significant revision in the months (and years) ahead. Nevertheless, the weakness in income growth is showing through in retail sales data, which, as mentioned, has actually declined since March.


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