Friday, January 23, 2009

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

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) fell sharply by -1.17% vs. -0.88% last week, and although its annualized growth rate rose moderately to -24.4 vs. -25.2 last week, it remains near its record low for its 60-year history of data of -30.4 for the week ended December 12, 2008, which is well below the flat line, suggesting that the economy will be struggling in the months ahead.

According to ECRI, "With the WLI declining again, it is premature to objectively declare that the worst of the recession will soon be behind us."

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 some amount of stimulus as well as potential problems in the pipeline.

My personal outlook is that: The recession of the U.S. economy that started in December 2007 and sharply accelerated in August 2008 currently shows no sign of an imminent end. There was a modest flattening of the WLI recently, but even that seems to be reversing. Still, the WLI has not set a new low for six weeks now.

Although the current economic reports show significant weakness, there is also a vast amount of potential stimulus in the pipeline that could kick-start the economy within the next couple of months.

-- Jack Krupansky

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