Today's release of the publicly available data from ECRI (Economic Cycle Research Institute) puts its Weekly Leading Index (WLI) at 133.4, up from 132.4 the previous week. The WLI annualized growth indicator (WLIg) is at 0.3, down from the previous week's 0.4, and off its interim low of -4.7 in mid-January.
“Recoveries Remain Resilient”
ECRI currently features an article suggesting that concern over negative trend growth is no reason to panic. Recession is not imminent as we are not yet in a “window of vulnerability.” The article also discusses Spain's recent cyclical upturn and warns that one shouldn't assume that a cyclical upturn also means positive long-term trend growth. The overall message is not to “fret about recession just yet”.
Read the full version here.
The ECRI Indicator Year-over-Year
Below is a chart of ECRI's smoothed year-over-year percent change since 2000 of their weekly leading index. The latest level is fractionally higher than it was at the start of the last recession.
Appendix: A Closer Look at the ECRI Index
The first chart below shows the history of the Weekly Leading Index and highlights its current level.
For a better understanding of the relationship of the WLI level to recessions, the next chart shows the data series in terms of the percent off the previous peak. In other words, a new weekly high registers at 100%, with subsequent declines plotted accordingly.
As the chart above illustrates, only once has a recession ended without the index level achieving a new high — the two recessions, commonly referred to as a “double-dip,” in the early 1980s. Our current level is still off the most recent high, which was set back in June of 2007. We've exceeded the previously longest stretch between highs, which was from February 1973 to April 1978. But the index level rose steadily from the trough at the end of the 1973-1975 recession to reach its new high in 1978. The pattern in ECRI's indictor is quite different, and this has no doubt been a key factor in their business cycle analysis.
