Economy Plunging to 33 Year Low?

According to the U.S. Weekly Leading Index (US WLI) for the week ending 10/10/2008 published by Economic Cycle Research Institute (ECRI), economic growth remains solidly in recession territory. Lakshman Achuthan of ECRI states:

With its biggest weekly plunge in 37 years, WLI growth has dived to a new 33 year low. This data objectively shows that financial market turmoil is rapidly worsening an already grim recessionary outlook.

The US WLI has a slight lead over business cycles, and is released seven days after the reporting period. Occasionally the WLI level and growth rate can move in different directions, because the latter is derived from a four-week moving average.

Disclosure: None

Comments

[investor88:]

Steven's article here is most useful. Can be even more useful if there are some notes on how the WLI is contructed.

Steven has the practical investing approach of going with the flow and getting results. This has earned him a well deserved early retirement. [Contrast this with Warren Buffet's NY times article which says "cash is trash" and "BUY AMERICAN stocks, I AM". We cannot say what works for Warrren for he didn't become the world's richest man for nothing, but if you are not Warren then using his method can be quite disastrous at times for mere mortals. Steven's approach is anchored in reality and survival, may be SIMPLER and more PRACTICAL for mere mortals?]

2008 Oct 19 06:12 AM

[bigpal:]

Thanks steven for open my eyes. We are already recession in the US.
But not mean we have to stop buying stocks, be creative, buy only for short term, people also do that and cause everyday volatile.

2008 Oct 19 08:23 AM

[San_Fran_Sam:]

I am drawing an additional conclusion from the graph. Notice that with a few exceptions whenever the WLI has dipped below 0, there has been a recession. The exceptions of 1987 and 1998 i believe are related to the connection between the WLI and the stock market as these tie to the 87 crash and the 98 LTCM crisis.

That in mind, the WLI has been negative for over a year now. But no declared recession.

My conclusion is that the reported economic statistics upon which recessions are based are distorted. That we have been in a recession for at least six months if not longer.

2008 Oct 19 08:07 PM