ECRI Weekly Leading Index indicator falls modestly and still suggests high risk of recession

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) fell modestly (-0.24% vs. +0.81% last week) but the six-month smoothed growth rate rose slightly (to -10.4 from -10.5 last week), and is well below the flat line, suggesting that the economy will be struggling in the months ahead.

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

I will keep my personal assessment of the chance of recession at 60% based on the magnitude of the negative level of the WLI smoothed growth index and the mixed nature of the data. The economy still has a fair chance of avoiding an outright recession, but only if we can repeat the improvement we have seen over the past six weeks.

No comment from ECRI this week, but the numbers haven't changed much since last week when they said that, "While WLI growth has stabilized a bit in the last two weeks, it remains in recession territory."

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.

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.

Right now, the WLI is higher than its level of six weeks ago and the smoothed growth rate is higher than three weeks ago. That is clear short-term improvement, but does not necessarily indicate a durable improvement for the medium-term.

-- Jack Krupansky