Friday, July 10, 2009

ECRI Weekly Leading Index rises sharply, strongly 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 +0.98% vs. -0.10% last week, and its annualized growth rate rose very sharply from +3.9 to +5.4, well above its record low for its 60-year history of data of -29.7 for the week ended December 5, 2008, and its distinct upturn strongly suggests that recovery is on the way.

This was the third consecutive positive reading for the WLI growth rate since August 10, 2007, over 22 months ago.

The WLI growth rate has risen for 15 of the past 17 weeks.

According to ECRI, "It is increasingly evident that, despite widespread misgivings based on backward-looking economic data, the end of recession is at hand." The Reuters article noted that "ECRI Managing Director Lakshman Achuthan holds that recovery is imminent before the year's end, as long as economic data continues to weaken at a slower pace." In other words, ECRI seems to be backing off its forecast of an end to the recession this summer and is now forecasting an end "before the year's end."

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 a double-dip recession or "W" recovery cannot be discounted, it is becoming quite clear that the overall U.S. economy is on the verge of positive growth of spending and output, even if unemployment is still problematic.

Although the current economic reports continue to show significant weakness, there is also a vast amount of potential stimulus (especially from the Federal Reserve) 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 further employment losses or gains in unemployment even as recovery is underway.

-- Jack Krupansky


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