Saturday, October 14, 2006

ECRI Weekly Leading Index indicator for future growth falls moderately sharply but growth rate remains modestly negative but still near flat line

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) fell moderately sharply (-0.58% vs. +0.99% last week) and the six-month smoothed growth rate fell modestly (from -0.6% to -1.0%) but remains relatively near the flat line, suggesting an economy that has leveled out.

A WLI growth rate of zero (0.0) would indicate an economy that is running at a steady growth rate, neither accelerating nor decelerating. A WLI fluctuating in a range from +1.5% to -1.5% would seem to be a relatively stable "Goldilocks" economy.

Although the WLI smoothed growth rate is somewhat weak and will likely remain so for the next few months, it isn't showing any signs of the kind of persistent and growing weakness (values more negative than -1.5% over a period of time) that would be seen in an economy that was slowing on its way into recession, but does look a lot like an economy moderating on its way to a relatively stable growth rate.

If I were looking at this one indicator alone, I'd say that the Fed is succeeding at its goal of moderating the economy to a sustainable growth rate. Goldilocks might not be completely happy with the current state of the economy, but she should be.

-- Jack Krupansky


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