ECRI Weekly Leading Index indicator falls slightly but still suggests high risk of recession

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) fell slightly (-0.09% vs. +1.83% last week) and the six-month smoothed growth rate fell sharply (to -9.1 from -7.9 last week), well below the flat line, suggesting that the economy will be struggling in the months ahead.

The bottom line is that the ECRI WLI is "flashing red." Alas, even the ECRI WLI is not a guaranteed, fool-proof economic indicator.

As I suggested last week, I will raise my personal assessment of the chance of recession from 55% to 60% based on the magnitude of the negative level of the WLI smoothed growth index. The economy still has a good chance of avoiding a recession, but only if we can repeat some of the better news that the WLI saw a week ago.

According to ECRI, "WLI growth is at recession-area readings, consistent with ongoing contractions in the financial and construction sectors. However ECRI's leading indexes for the manufacturing and non-financial services sectors have yet to confirm recessionary conditions."

To be clear, there is no certainty as to whether we are currently in a recession. It will take another four months to confirm, if we are in fact in a recession. The current, weekly, high-frequency economic data strongly suggests that we are in fact not in a recession.

Give the economy another month or so to see if the the weakness starts to "snowball." Without "snowballing" we will simply have a slowdown and not a true recession.

-- Jack Krupansky