ECRI Weekly Leading Index continues to recover modestly and annualized growth rate bounces further off low

Despite the weak unemployment insurance initial claims report these past two weeks, the Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) rose modestly for a third week in a row to a nine-week high. More significantly, the WLI annualized growth rate continued on its recently reversed course and rose modestly from its recent low of two weeks ago. Two weeks do not assure a durable trend, but this is at least not a worsening of the outlook.

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

The annualized growth rate for WLI remains moderately below zero, but modestly higher than a week ago. At -9.8, it is now slightly above the -10.0 level that some pundits (but not ECRI) view as indicating a recession on the way, but ECRI does not concur. Actually, what ECRI says is that "if it turns down once again, that would signal heightened recession danger." That's an "if" and we're not currently headed in that direction. Still, it will take more than a couple of weeks to determine if the trend has indeed turned back up in a sustainable manner.

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  we're not headed in that direction at the present time.

The WLI suggests that the economy 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. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

-- Jack Krupansky