ECRI Weekly Leading Index indicator rises sharply but still suggests a very sluggish outlook

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose sharply (+1.12% vs. +0.06% last week) but the six-month smoothed growth rate fell moderately (from -6.3 to -6.7, a 6-year low), moderately below the flat line, suggesting that the economy will be somewhat sluggish in the months ahead.

The WLI does indicate the economic outlook is rather weak, but not so weak as to suggest that a recession is imminent.

According to ECRI, "It is still possible for prompt policy action to help avert a recession." Last week they said "WLI growth is now at its worst reading since the 2001 recession. However, the WLI's recent decline is not based on pervasive weakness among its components, suggesting that a recession could still be averted."

I will offer the caveat that the Weekly Leading Index and its smoothed growth rate do not tell us how strong the economy will be six or nine months from now, but do tell us whether whether weakness or strength is more likely a few months from now. It works best to tell us whether a "gathering storm" might be lurking just around the corner. It presently indicates "cloudy weather" for the next few months, but is still not forshadowing major storms in the real economy, even if financial markets and some sectors of the economy may continue to struggle.

-- Jack Krupansky