Friday, November 4, 2011

USA Weekly Leading Index Continues Rebounding (Charts, Videos) *At 7-week high*

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ECRI Economic Weekly Leading Index and Annualized Growth Rate
* Updated November 4, 2011 for the week ended October 28, 2011 *

USA Weekly Leading Index

Overview The USA Economic Weekly Leading Index (WLI) rebounded +0.9 to a 7-week high of 122.1 (preliminary) for the week ended October 28, 2011. This reading continues above the 116-week low of 120.0 for the week ending October 7, 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. The WLI has increased 3 consecutive weeks, but has decreased 9 of the past 13 weeks.

Trend The short-term and intermediate-term trends continue downwards. The long-term trend is now level.

Cycle History The current 122.1 (preliminary) for the week ended October 28, 2011 is above the recent 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 post-recession peak of 134.9 for the week ended April 30, 2010, the prior intermediate-term low of 120.3 for the week ended July 9, 2010, and the 116-week low of 120.0 for the week ended October 7, 2011, through the latest week reported.

USA Annualized Growth Rate

Overview The WLI Annualized Growth Rate (AGR) rebounded +0.7% to -9.4% (preliminary) for the week ended October 28, 2011. This reading is above the 63-week low of -10.1% for the weeks ending October 14 and 21. That was the lowest reading since the AGR was -10.5% for the week ended July 30, 2010. The AGR has decreased 11 of the past 13 weeks. The Annualized Growth Rate had been positive for 35 consecutive weeks before turning negative the past 11 weeks. The AGR has decreased or been flat 23 of the past 28 weeks, including decreasing 11 consecutive weeks from April 22 through July 1 and decreasing 11 consecutive weeks from August 11 through October 14.

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

Cycle History The recent short-term peak was +8.0% for the week ended April 15, 2011. The recent short-term low was -10.1% for the weeks ended October 14 and 21, 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 and the recent low of -10.1% for the weeks ended October 14 and 21, 2011, 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 then reversed to negative beginning the week ended August 19, 2011.

Commentary According to Lakshman Achuthan's interpretation of his indicators, a USA Recession is coming (see video below). Overall, both the Weekly Leading Index (WLI) and the Annualized Growth Rate (AGR) decreased beyond 1-year lows. Both the WLI and AGR had diverged downwards from the equity markets, especially the S&P 500, which they tend to positively correlate with. Both the WLI and AGR are near the post-recession lows. The WLI has been below the now distant benchmark 130.0 level for 25 consecutive weeks and the AGR has been below the 0.00% benchmark for 11 consecutive weeks. The Weekly Leading Index and Annualized Growth Rate continue at levels that indicate any future economic growth is questionable. The levels are worrisome, but the recent trend has been upwards. 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.


Flashback: Squaring Higher Stocks With Recession Flashback to an April 2008 interview discussing how ECRI's recession call remained intact despite a rise in stock prices and other data.


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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