Friday, May 08, 2009

ECRI Weekly Leading Index rises sharply suggesting that an end to the U.S. recession is now in clear sight

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose sharply by +1.47% vs. +0.46% last week, and its annualized growth rate rose sharply from -17.5 to -16.1, moderately above its record low for its 60-year history of data of -29.7 for the week ended December 5, 2008, and although it remains well below the flat line, the distinct upturn does strongly suggest that recovery is on the way.

According to ECRI, "The level of the WLI is fast approaching a six-month high, making it increasingly likely that the U.S. recession will end this summer."

My personal outlook is that: The recession of the U.S. economy that started in December 2007 and sharply accelerated in August 2008 finally looks as if recovery may be underway within the next few months.

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. Please keep in mind that employment is not a leading indicator, so we could continue to see employment losses even as recovery is underway.

-- Jack Krupansky


At 2:57 AM EDT , Anonymous Anonymous said...

I realize WLI tries to anticipate the economic cycle, but then, so do the markets which are up sharply from their March 9th lows.

Does the ECRI-WLI lead the markets or lags them?

Some answers here:

At 6:56 AM EDT , Anonymous Jack Krupansky said...

The stock market is in fact one of the data components used to calculate WLI each week.

The stock market has classically (back to Charles Dow) been seen as a "barometer" for the economy.

So, it would not make any sense to expect that the WLI would "lead" the stock market any more than one might say that the stock market leads itself.

At best, the WLI can be used to "confirm" that the stock market is moving in a direction that is consistent with the economic outlook that the WLI "forecasts."

ECRI would tell you that WLI works best at "turning points", should when a good economy is turning bad and vice versa.

-- Jack Krupansky


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