ECRI’s Leading Indicators in Recession Territory

The Leading Economic Indicators (LEIs) have not been are not my favorite of all data points.

Long term readers may recall my ire over the way the Conference Bureau tweaked the calculating of the Leading Economic Indicators’ in terms of the yield curve in order to make them more bullish. Hence, why I look at them somewhat askance (NT’s Paul Kasriel has convinced me this is a hasty opinion on my part).

Rather than rely on the Conference Board’s Juiced Data, we can turn instead to the Economic Cycle Research Institute (ECRI) data leading indicators. Their indicators have a very good track record of forecasting recessions.

Leading Economic Indicators Index in Recession Territory
click for jumbo chart

Chart courtesy of Lakshman Achuthan, ECRI 


The ECRI’s weekly leading economic index is now deep into the territory associated with recessions. Its down over 10% this month, and this week is running down 8% on a year-over-year basis. As the chart above shows, that is something that only happens when the economy is in recession.


Juiced Data (August 2005)

Mis-Leading Economic Indicators (August 2005)


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What's been said:

Discussions found on the web:
  1. bdg123 commented on Jul 17

    As the world crumbled around him, Achuthan remained resolute that first we weren’t in a recession and second a stimulus could save us from recession. Until this cycle I had a reasonable respect for ECRI but constant remarks clearly showing a complete lack of understanding of economics and a slavery to their doodad showed me he needs to go back to school and unlearn economics. Now that banks are down 90%, they are calling a recession. Useful to a business maybe. To investors?

  2. EV commented on Jul 17

    Also of relevance from ECRI-

    NEW YORK, July 3 (Reuters) – U.S. inflation pressures fell
    in June to more than a four-year low, driven by disinflationary
    moves in measures of jobs, loans, interest rates and commodity
    prices, a report said on Thursday. The Economic Cycle Research Institute’s U.S. Future
    Inflation Gauge (USFIG), designed to anticipate cyclical swings
    in the rate of inflation, slipped to 115.2 in June from 116.6
    in May revised from 116.7. The reading was the lowest since January 2004, when the
    index stood at 114.8. “Despite higher oil prices and the weaker dollar, the USFIG
    continues to slide as underlying inflation pressures in the
    U.S. remain in a cyclical downtrend,” said Lakshman Achuthan,
    managing director at ECRI, in an instant message interview. “This decline in the USFIG stands in stark contrast to the
    comparable Euro zone FIG, which raced to a 17-year high
    today.” The USFIG annualized growth rate, which smooths out monthly
    fluctuations, fell in June to minus 3.9 percent from minus 2.4
    percent in May, revised down from negative 2.2 percent.
    (Reporting by Rodrigo Campos; Editing by James Dalgleish)

  3. VennData commented on Jul 17

    To get the economy moving we need another war. One that will pay for itself for real this time. I propose Liechtenstein.

    …IRS takes over at Gitmo (it’s the only other branch of government where you’re guilty until proven innocent) Whether you’re innocent or not, you get audit-boarded and John Yoo represents you, via memo, from Berkeley.

  4. Alfred commented on Jul 17

    On LK’s show Brian Wesbury predicted close to 4%!! growth in the second quarter. Today IMF upgraded its growth forecast for the US for 2008 to 1.3% from 0.5%.

  5. scorpio commented on Jul 17

    explains why we’re getting consumer confidence #s comparable to 1975, 1980, 1990 recessions. those were doozies. will somebody please reconstitute the “misery index” using 1970s era definitions of inflation? let’s put this apples-to-oranges thing to rest. it’s ugly out there.

  6. michael schumacher commented on Jul 17


    No coincidence that the market gets juiced two days after oil starts to fall. Gotta put those profits somewhere….

    Still wouldn’t short oil though……’cause you KNOW what is coming.


  7. Scott commented on Jul 17

    Wesbury has gone to the dark side

    He’s dranken the Community Reinvestment Act is responsible-for-the-Housing-collpase-Koolaid.

    He’s now in the worthless Political Hacks you can safely ignore as an investor column, along with Bowers and Luskin.

  8. MarkTX commented on Jul 17

    Using current bona fide US Govt. Numbers

    Misery Index (9.68) = Unemployment rate (5.5) + Inflation rate (4.18)

    High: 21.98% June 1980
    Low: 2.97% July 1953

    Using “Before Reagen” inflation numbers

    Misery Index = (17.8) Unemployment rate (5.5) + Inflation Rate (12.3)* Shadow Stats

    Almost double the misery “official” misery index

    But what misery? The Dow is now skyrocketing, the people need to quit whining and shut up and take their misery…..

    Remember Options Ex tomorrow,

    amazing how the DOW seems to put in MONSTER BULL RALLYS the same F’in week.
    700+ of Tuesday lows (and counting)
    Rigging the stock market by the Govt. does work…

  9. Steve Barry commented on Jul 17

    Nice two day rally…my rule of thumb is any 2 day movement, or violation of support or resistance can be totally discounted as noise. I need more convincing. But you could never convince me that this rally is real with put/calls so mediocre, VIX at 24, options and futures traders complacent and ridiculously low short interest on QQQQ and its major components such as GOOG, AAPL, MSFT and RIMM.

  10. Owen B. commented on Jul 17

    I don’t see ECRI’s subscriber reports, but it looks like they made their recession call in March sometime (see last paragraph of this April Forbes article).

    While they do mention the first stimulus package, I don’t see where they’ve argued another stimulus package would avert recession. To the contrary, they seem to be saying “the train has left the station” in terms of chances to forestall recession.

  11. michael schumacher commented on Jul 17


    do a little geo-political research and you might be able to understand what IS going to happen before Jan. 20th 2009.

    It’s not fundamentally driven..but I suppose if you believe that oil is trading on supply/demand then there’s nothing I, or anyone else, can tell you.


  12. Steve C commented on Jul 17

    I think Michael S is referring to a possible conflict between Israel and Iran.

  13. James S. commented on Jul 17

    Can anyone explain how bad they think it’s gonna get in visible, concrete examples? For example, will there be food riots in LA? How about breadlines in Iowa? Gas lines in Texas?

    I think one of the big problems we have is that bad economies in the US rarely show visible, undeniable signs so many people are able to simply dismiss the problems as “whining” or only happening to “the poor”.

    Foreclosures in the Hamptons is a good example. What’s the bottom of this recession gonna look like, in visible everyday terms?

  14. Simon commented on Jul 17

    I’d like to know your sources M.S. If indeed you do believe an offensive into Iran is almost certain. I was calmed by the headline news that “Condalize Rice sp??” was starting to talk about talk with the Iranians.

    I read that as some sort of preliminary diplomatic work based on an assumed almost certain Democrat victory mixed with a bit of contrition from the current administration.

    I would also happily believe that it was a red herring to help ease the pressure on oil and to bluff the Iranians into softening their defence preparations.

    Although that is a very depressing thought.

  15. michael schumacher commented on Jul 18

    sorry but if yo believe ANYTHING that comes from this administration then you are further gone than you’re post suggests.

    Ask yourself this question:

    After 8 years of power and doing everything they can to keep that power do you think a little thing like losing an election is going to prevent them from just handing over that power?

    Not a chance….but good luck if you think anything from Bushco is what is being presented.


  16. Owen B. commented on Jul 18

    NEW YORK, July 18 (Reuters) – A gauge of future U.S. economic growth and its annualized growth rate were both lower in the latest week, with the latter at a two-month low and still indicating the economy is facing a recession, a research group said on Friday.

    The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 131.2 in the week to July 11 from 132.3 in the previous period, downwardly revised from 132.5.

    The decline in the index was due to higher jobless claims and lower stock prices, partly offset by lower interest rates, said Melinda Hubman, research associate at ECRI.

    The index’s annualized growth rate slipped to negative 6.4 percent — its lowest since minus 6.5 in the week to May 16 — from minus 6.3 percent in the previous week, revised down from minus 6.1 percent.

    “The slide in the already negative WLI growth to an eight-week low affirms its recessionary standing,” Hubman said.

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