Friday, July 30, 2010

ECRI Weekly Leading Index recovers modestly, but annualized growth rate still negative

The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) rose modestly after being near flat for two weeks.

The WLI is well below its peak in April, and roughly at the same level as a year ago when the recovery was just getting underway in earnest.

The annualized growth rate for WLI is moderately below zero, modestly lower than a week ago. Some pundits view the growth rate (now -10.7%) as indicating a recession, but ECRI does not concur. The pace of decline appears to be decelerating, suggesting that the growth rate may be near stabilizing.

We had a massive bulge of stimulus, which peaked and dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here (the level of a year ago) for a couple more months, that would be a problem, but with a couple of flat weeks now a moderation looks more likely, to me.

The WLI suggests that the economic is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective.

-- Jack Krupansky

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