Thursday, July 03, 2008

ECRI Weekly Leading Index indicator falls modestly and remains deep in recession territory

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) fell modestly (-0.34% vs. -0.70% last week) and the six-month smoothed growth rate fell modestly (to -6.3 from -6.0), which is well below the flat line, suggesting that the economy will be struggling in the months ahead.

According to ECRI, "The decline in WLI growth to a 23-week low underscores the reality that recession is the immediate problem at hand."

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 and there is a lot of stimulus as well as potential problems in the pipeline.

I will keep my personal assessment at a high level confidence that there is no more than a 65% chance of recession and a moderate level of confidence that there is no more than a 35% chance of recession based on the fact that we are seeing some hints of moderation mixed in with all of the gloomy news.

I am somewhat optimistic that the U.S. economy will escape a full-blown recession, but I do have to recognize what the data itself is signaling to me, as well as ECRI's assessment and recession "call."

The bottom line is that the economy remains at "the edge" of a recession, but persists in refusing to overtly "fall" into recession.

-- Jack Krupansky


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