Friday, September 04, 2009

ECRI Weekly Leading Index rises modestly and still indicates an imminent economic recovery

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose modestly by +0.29% vs. -0.48% last week, and its annualized growth rate rose sharply from +19.6 to +20.8 and has "surged to a 38-year high that suggests the recovery is on track", and its distinct upturn strongly suggests that recovery is on the way.

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

The WLI has risen for 22 of the past 25 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 rising to a new 38-year high, U.S. economic growth is poised for a stronger snap-back than most expect."

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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