Growth trend of the economy

I'm not reading all the economic reports that I did before I took on a full time job in May, but I still get the Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) every week. Their six-month smoothed growth rate has trended downward since a near-term peak in February and may continue to trend down for a few more weeks, but the weekly data has been trending up since a near-term low in late May. All of this data is still positive, albeit not as strong as back in February. In other words, the economic growth signals are confused and inconsistent, but that is consistent with an economy that is shifting to a more moderate and stable rate of growth. The economic growth signals work best when the economy is sharply accelerating or sharply decelerating since they are measuring acceleration of the rate of growth and not the rate of growth itself. The leading growth signals will be more volatil and bounce around when the rate of growth is changing only modestly. The real bottom line is that the upwards pressure on the economy is still positive, albeit only modestly.

None of this suggests any problems and is completely consistent with what the Fed is trying to do: keep the economy growing at a sustainable pace. Or as I keep saying: neither booming nor busting.

-- Jack Krupansky