Friday, September 11, 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 +0.64% vs. +0.23% last week, and its annualized growth rate rose moderately from +20.8 to +21.3 and has surged to "an all-time high that points to a more vigorous recovery than consensus has shown", and its distinct upturn strongly suggests that recovery is on the way.

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

The WLI has risen for 23 of the past 26 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, "The rise in WLI growth to a record high reinforces our earlier forecast that at least the early stage of the current economic recovery will be more vigorous than the last two."

ECRI also said that "We expect non-manufacturing employment -- which is where 91 percent of us work -- to be positive by year end."

And ECRI said that "We are talking about recovery that includes jobs growth in the non-manufacturing sector, and we are talking about a recovery that includes increases in consumer spending. So, in spite of the fact that many people look at this recession as being unprecedented and unlike any other, what we're seeing in our indexes is that there are a lot of similarities to previous recessions and recoveries."

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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