Friday, October 14, 2011

USA Weekly Leading Index Plunges to 116-Week Low! (Charts, Video) Recession inevitable: "wildfire in the leading indexes"


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ECRI Economic Weekly Leading Index and Annualized Growth Rate
* Updated October 14, 2011 for the week ended October 7, 2011 *


USA Weekly Leading Index

Overview The USA Economic Weekly Leading Index (WLI) dropped -0.3 to a 116-week low of 120.2 (preliminary) for the week ended October 7, 2011. This is the lowest reading since the WLI was 118.8 for the week ended July 17, 2009. The previous intermediate-term low had been 120.3 for the weeks ended July 9, 2010 and July 24, 2009. This is the 5th consecutive weekly decrease and the 9th decrease in the past 10 weeks.

Trend The short-term, intermediate-term, and long-term trends continue downwards.

Cycle History The current 120.2 (preliminary) for the week ended October 7, 2011 is a 116-week low. The recent short-term peak was 131.8 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 57-week low of -9.6% (preliminary) for the week ended October 7, 2011. This is the lowest reading since the AGR was -9.8% for the week ended September 3, 2010. The AGR has had 10 consecutive, significant weekly drops. The Annualized Growth Rate had been positive for 35 consecutive weeks before turning negative the past 8 weeks. The AGR has decreased or been flat 21 of the past 25 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 had been level, but is now descending slightly.

Cycle History The recent short-term peak was +8.0% for the week ended April 15, 2011. The recent short-term low is now the current -9.6% (preliminary) the week ended October 7, 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 Post-Recession 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 According to Lakshman Achuthan's interpretation of his indicators, a USA Recession is inevitable (see video below). Overall, both the Weekly Leading Index (WLI) and the Annualized Growth Rate (AGR) continue decreasing and are beyond 1-year lows. Both the WLI and AGR have diverged downwards from the equity markets, especially the S&P 500, which they tend to positively correlate with. Both the WLI and AGR are nearing the Post-Recession lows. The WLI has been below the now distant benchmark 130.0 level for 22 consecutive weeks and the AGR has been below the 0.00% benchmark for 8 consecutive weeks. The Weekly Leading Index and Annualized Growth Rate continue at levels that indicate any future economic growth is becoming questionable. Both the levels and trends are worrisome. 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.

video

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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