Friday, August 21, 2009

ECRI Weekly Leading Index rises moderately and indicates an imminent economic recovery

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose moderately by +0.48% vs. +1.67% last week, and its annualized growth rate rose very sharply from +14.3 to +17.5, rising "to a fresh 26-year high", and its distinct upturn strongly suggests that recovery is on the way.

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

The WLI growth rate has risen for 21 of the past 23 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, "It is high time to break from the herd of pessimistic analysts, who will continue to bemoan economic weakness long after the Great Recession is history." The Reuters article says that ECRI is "suggesting a strong recovery is already in motion."

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.

I did watch a recent video in which ECRI insisted that a double-dip was definitely not in the cards based on the strength of the bounce in the leading indicators.

Although quite a few, but not all, of 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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