Friday, August 14, 2009

ECRI Weekly Leading Index rises very sharply and indicates an imminent economic recovery

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose very sharply by +1.77% vs. +1.82% last week, and its annualized growth rate rose very sharply from +10.4 to +13.4, "surged to a 26-year high", and its distinct upturn strongly suggests that recovery is on the way.

This was the eighth consecutive positive reading for the WLI growth rate since August 10, 2007, two years ago.

The WLI growth rate has risen for 20 of the past 22 weeks.

The WLI has now recovered to its level in mid-September 2008. That is a major recovery, but also highlights that the economy has a long far to go to get back to "normal."

According to ECRI, "With WLI growth surging, the odds are rising that the early stage of this economic recovery will be stronger than any since the early 1980s. Next year, looking back you'll see that GDP, industrial production, sales, and even non-manufacturing jobs growth -- where 91 percent of Americans work -- began rising as recovery took hold."

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 will be firmly 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 we could continue to see further employment losses or gains in unemployment even as recovery is underway.

-- Jack Krupansky

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