ECRI: Strong Signal Recession Will End this Summer

According to the U.S. Weekly Leading Index (US WLI) released on 19 June 2009 published by Economic Cycle Research Institute ((ECRI)), there are continuing signs of economic improvement. Lakshman Achuthan of ECRI states:

With WLI growth rocketing up almost 30 percentage points in six months, it's virtually pounding the table about the recession ending this summer.

The US WLI has a slight lead over business cycles.

As a leading indicator, the WLI is forecasting economic conditions approximately six months in the future. I have simultaneously published a complete economic analysis – please refer to my other article published today.

Disclosure: None.

Comments

[Donald Ingram:]

This forecast may be a little premature. There are so many more variables out there to consider. Throw in a few 'wild' cards (Iran and Pakistan to name two) and you have a recipe for destroying any well made forecast.
Most depends now upon the U.S. dollar and where it goes from here.

Jun 19 01:03 PM

[John Ryskamp:]

Hey Steve,

Don't you realize ECRI is based on phony data? Do you know that ECRI completely failed to call this recession? Look at some of their postings in 2006. This organization is intellectually sloppy. They're like the Conference Board. They relying on bad models and in addition take no account of the Federal Government's phonying the data. Why even bother reporting what a corrupt organization like ECRI has to say?

Jun 19 01:08 PM

[Steven Hansen:]

John,
i do not know what postings in 2006 have to do with this recession. they are calling business cycles, and if they were spouting garbage about an upcoming recession back then - i am not sure what what business would be helped. we were in a strong business cycle in 2006.

in my view, they correctly predicted not only the timing, but the severity of this recession.

Jun 20 10:26 AM

[Alphameister:]

Steven,

Good to learn you aren't an intransigent pessimist! ;) I knew you'd get some flack for presenting a very good indicator that suggests we'll be getting some positive economic news in the weeks and months ahead. As for "wild cards" like Iran and Pakistan, seems to me the bears are becoming a bit desperate in hanging their hats on such impossible-to-predict externalities.

Jun 20 12:02 PM

[Fred Voetsch:]

I respect what ECRI has to say but the stock market is one of their most important LEI's and if this was truly a dead-cat-bounce, bear market rally as we saw after the crash of 1929 then their data is not only meaningless but is highly misleading.

There are few times that I allow all my other data to override what I hear from ECRI and this is one of them. Most of the other positive data seems obviously about inventory rebuilding after an extreme scare. Nowhere do I see real, lasting recovery.

Jun 20 06:29 PM

[mikesa69:]

Oh Steve you've made me so happy. I'm glad it's ok to believe the WLIs. Maybe I'll get back everything I lost in 2008 and then some!

So wow, the stock market is up. Yippie!

And inventories have bounced from seriously depressed levels. Hoo boy!

And consumer confidence is the highest it's been in a while. (Boy those consumers sure are stupid... they believed the 'stress' test results!)

Oh, and money supply has been elevated to the stratosphere. (Hey, it's always good to have more money, right???)

Yep, I'd say we're looking at new all-time highs in the indices within the next 6 months. Come on Dow 15,000! Hell, skip that. We might as well just call it Dow 20,000 by December '09. While we're at it, why not Dow 25,000???

NOT! This is all fantasy and farce.

Wake up America!!! Our politicians are in the process of floating the last bit of credit they have in an effort to reinflate a burst bubble one last time. When this thing finally crashes, the can-kickers will wish they would have at least tried to endure some short-term pain in order to reduce the impact of the inevitable.

We need term limits on CONgress and the SINate or we'll never get out from the corruption and cronyism.

Jun 20 08:25 PM

[John Lounsbury:]

John Ryskamp - - -

You are destroying your credibility in two ways:

1. Trying to use data from ECRI in 2006 to relate to a recession that started in December, 2007. ECRI does nor look into crystal balls; they read economic data and try to make feterminations of where we are in the business cycle.
2. Failing to mention (or maybe you didn't know) that ECRI issued their determination that a recession had started in mid-March, 2008. This was 9 months before the official announcement from the NBER.

Intellectual honesty is a two-way street, with the send of intellience and the receiver of intelligence both playing a role.

Fred Voetsch and mikesa69 - - -

You both mention in different ways the possible weakness in the ECRI data. If the stock market can not hold its recent gains, the leading indicator may start to fade.

Ending the recession may not solve many of our problems, though. The biggest problem we face may be the shape of the recovery. The ECRI coincident indicator is easing into a flat bottom. What if it stays there? Will we be doing very well if there is only the cessation of decline and no growth?

The end of the recession may not be the end of pain.

Jun 20 08:52 PM

[thiazole:]

Ah, I wish I would have seen this earlier so I could dispell some of the myths presented here. Unfortunately this is probably too late for many to see it, but I'll put it here anyway. The ECRI's weekly leading index DOES include the stock market as one of its leading indicators and is therefore somewhat skewed when the stock market rises. Their long leading index does NOT include the stock market, and it has already turned positive weeks ago (the WLI will probably turn positive this week). This isn't just the stock market moving their indexes. Also, they don't just rely on government data, either. They have released "some" of their indicators to the public just to dispell that myth. One of their indicators, for example, is the sales of a kind of soap that is used to clean factory floors. When orders for this soap are up, it implies that factories are getting ready to ramp up production. Again, that is just 1 of probably 100 or more different indicators that they use, but it is an example of how they don't rely on just government data.

Jun 25 01:11 PM

[Owen B:]

Isn't it "sloppy" to assert that which is not true. ECRI did warn of recession beforehand (in real-time the WLI peaked six months before the recession started). Furthermore, I've never seen them say they use models. They use leading indexes. It seems you don't know what you're talking about. Alternatively, you have some other agenda.


On Jun 19 01:08 PM John Ryskamp wrote:

> Hey Steve,
>
> Don't you realize ECRI is based on phony data? Do you know that
> ECRI completely failed to call this recession? Look at some of their
> postings in 2006. This organization is intellectually sloppy. They're
> like the Conference Board. They relying on bad models and in addition
> take no account of the Federal Government's phonying the data. Why
> even bother reporting what a corrupt organization like ECRI has to
> say?

Jul 20 03:43 PM