Saturday, October 8, 2011

USA Weekly Leading Index Drops to 57-Week Low! (Charts, Video) "Contagion in the forward-looking indicators"


ECRI Economic Weekly Leading Index and Annualized Growth Rate
* Updated October 7, 2011 for the week ended September 30, 2011 *

USA Weekly Leading Index

Overview The USA Economic Weekly Leading Index (WLI) dropped -0.6 to a 57-week low of 121.2 (preliminary) for the week ended September 30, 2011. This is the lowest reading since the WLI was 120.7 for the week ended August 27, 2010. This is the 4th consecutive weekly decrease and the 8th decrease in the past 9 weeks.

Trend The short-term trend and the intermediate-term trend continue downwards. The long-term trend is now decreasing.

Cycle History The recent short-term low is the current 121.2 (preliminary) for the week ended September 30, 2011, which is a 57-week low. The recent short-term peak was 131.9 for the week ended April 15, 2011. The Weekly Leading Index reached a Post-Great Recession peak of 134.9 for the week ended April 30, 2010. A Great Recession low of 105.4 was set for the week ended March 6, 2009. 

Weekly Leading Index (Chart) Below is a chart of the ECRI Weekly Leading Index, including the intermediate-term low of 120.3 for the week ended July 9, 2010, through the latest week reported.

USA Annualized Growth Rate

Overview The WLI Annualized Growth Rate (AGR) dropped -0.9% to a 54-week low of -8.1% (preliminary) for the week ended September 30, 2011. This is the lowest reading since the AGR was -8.5% for the week ended September 10, 2010. The AGR has had 9 consecutive, significant weekly drops. The Annualized Growth Rate had been positive for 35 consecutive weeks before turning negative the past 7 weeks. The AGR has decreased or been flat 20 of the past 24 weeks, including decreasing 11 consecutive weeks from April 22 through July 1.

Trend The short-term trend continues downwards and negative. The intermediate-term trend continues downwards. The long-term trend continues level.

Cycle History The recent short-term peak was +8.1% for the weeks ended April 15 and 22, 2011. The recent short-term low is now the current -8.1% (preliminary) the week ended September 30, 2011.  The Annualized Growth Rate reached a Post-Great Recession peak of +27.8% for the week ended October 9, 2009. A Great Recession low of -29.8% was set for the week ended December 5, 2008.

Annualized Growth Rate (Chart) Below is a chart of ECRI WLI Annualized Growth Rate, including the intermediate-term low of -10.9% for the week ended July 23, 2010, through the latest week reported. The AGR became negative in early June 2010 and remained negative for 28 consecutive weeks. The AGR was then positive for 35 weeks (from the week ended December 17, 2010 through the week ended August 12, 2011). The AGR reversed to negative beginning the week ended August 19, 2011.

Commentary Overall, the both the Weekly Leading Index and the Annualized Growth Rate continue decreasing and are beyond 1-year lows. Both are nearing the July 2010 intermediate-term lows. Gains previously attained have eroded. The WLI has been below the now distant benchmark 130.00 level for 21 consecutive weeks and the AGR has been below the 0.00% benchmark for 7 consecutive weeks. The Weekly Leading Index and Annualized Growth Rate overall continue at levels that indicate any future economic growth is becoming difficult, if not questionable. Both the levels and trend are worrisome. In addition, both are descending closer to the July 2010 intermediate-term lows. Per the ECRI, the Weekly Leading Index projects forward approximately 6 months and the Annualized Growth Rate is relative to the WLI and a 4-week moving average.

U.S. Recession Ahead Co-Founder and Chief Operations Officer of ECRI, Lakshman Achuthan, says an American Recession is ahead. "Contagion in the forward-looking indicators" is the reason for Achuthan's recession announcement and "why it is now inescapable". Further, "it is wildfire in the leading indexes" and this includes at least a dozen indicators. "When you have that kind of contagion, it is going to be pronounced, pervasive, and persistent and you are going to have a vicious cycle down that you cannot escape". He also states this is not a double-dip recession, but a discrete event, a discrete recession. The recovery since the Great Recession has been "underwhelming". Achuthan says it is too early to tell whether this recession will be shallow or deep.

About Lakshman Achuthan Co-Founder and Chief Operations Officer of ECRI, Achuthan is the managing editor of ECRI's forecasting publications. He is also a member of Time magazine's board of economists and the Levy Institute's Board of Governors, and serves as a trustee on the boards of several foundations. He received an undergraduate degree from Fairleigh Dickenson University in 1989 and a graduate degree from Long Island University in 1991. Achuthan joined Geoffrey H. Moore at Columbia University's Center for International Business Cycle Research in 1991. In 2004, he co-authored Beating the Business Cycle: How to Predict and Profit from Turning Points in the Economy.

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