Sunday, December 04, 2011

ECRI Weekly Leading Index weakens

The ECRI Weekly Leading Index (WLI) fell sharply this week, erasing almost five weeks of gains, and its smoothed growth rate declined modestly for the first time in six weeks. One data point in a series does not indicate a definite trend change, but it certainly is a disappointment. The real bottom line is that the WLI level remains hovering only modestly above its low of the year, which is more an indication of economic weakness than of strength. Unemployment insurance initial claims were up a little this week and mortgage applications were down sharply. The Thanksgiving holiday and Black Friday retail frenzy may have skewed the week measured by these numbers.
ECRI is scheduled to talk with Tom Keene on Bloomberg on Thursday, December 8 to discuss ECRI's recession call that they made in September. I don't expect any startling revelations relative to past interviews, but hopefully they will try to pin down ECRI as to when the purported recession is supposed to start, whether it is right now, before the end of the year, Q1, by mid 2012, late 2012, or whenever.
The bottom line is that ECRI is still standing by their recession call, namely that the U.S. economy is "tipping into a recession", but with no specificity as to when such a recession might start, how long it might last, or how severe it might be.
Q4 may well turn out to be a decent quarter (+2.8% GDP growth according to Macroeconomic Advisors), but the outlook for Q1 of 2012 and beyond is murky indeed. About the only certainty is that the Federal Reserve will continue to pump money into the economy, which is a very positive factor even if it does not absolutely assure economic growth. Congress will likely pass a renewal of unemployment insurance extension and the payroll tax holiday, but it is unclear how much of an economic boost that really provides. Obama's "Jobs" bill remains DOA where it always has been.


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