Saturday, September 26, 2009

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

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose sharply by +1.33% vs. +0.10% last week, and its annualized growth rate rose sharply from +22.9 to +24.3 and has surged to "a 60-week high", and its distinct upturn strongly suggests that recovery is on the way.

This was the fourteenth consecutive positive reading for the WLI growth rate.

The WLI has risen for 25 of the past 28 weeks.

The WLI has now recovered to its level at the end of July 2008. That is a major recovery, but also highlights that the economy has a long way to go to get back to "normal", whatever the "new normal" really is, especially given all of the economic distortions of the years that led up to the financial crisis.

According to ECRI, the recovery is "unstoppable"  and there are "no relevant roadblocks" to a sustainable recovery, and that "With WLI growth climbing to a fresh record high, the economic recovery is far from fragile."

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 completely 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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