The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.1, down from the previous week's 132.3, its lowest level in a year. The WLI annualized growth indicator (WLIg) is at -3.1, down from -2.4 the previous week. This is its lowest level since June 2012.
ECRI has been at the center of a prolonged controversy since publicizing its recession call on September 30, 2011. The company had made the announcement to its private clients on September 21st. ECRI's cofounder and spokesman, Lakshman Achuthan, subsequently forecast that the recession would begin in Q1 2012, or Q2 at the latest. He later identified mid-2012 as the start of the recession. Over the past two years he has been a frequent guest on the likes of CNBC and Bloomberg TV. In recent months he has adjusted the company's position, identifying the recession's “epicenter” as the half-year spanning Q4 2012 and Q1 2013.
Comparison With The Conference Board's Leading Economic Index
Yesterday the Conference Board released its monthly Leading Economic Index, data though November. Here is an overlay of the LEI with ECRI's WLI. The ECRI indicator is, not surprisingly, the more volatile of the two, given its weekly granularity. Note that I've included linear regressions for both series; they are virtually identical.
We can see in the chart above that both indicators hit lows in close proximity to what the NBER subsequently identified as the end of the last recession. Since then, the LEI has rebounded in a relatively smooth fashion. The ECRI WLI, in contrast, has been quite volatile with a post-recession peak in mid-2010 followed by a couple of head fakes to the downside, hence ECRI's September 2011 recession call.
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. I've highlighted the 2011 date of ECRI's original recession call and the hypothetical July 2012 business cycle peak, which the company previously claimed was the start of a recession. I've update the chart to include the “epicenter” (Achuthan's terminology) of the hypothetical recession.
As for the disconnect between the stock market and the mid-2012 recession start date, Achuthan has repeatedly pointed out that the market can rise during recessions. See for example the 2:05 minute point in the November 4th video. The next chart gives us a visualization of the S&P 500 during the nine recessions since the S&P 500 was initiated in 1957. I've included a dotted line to show how the index has performed since ERIC's original July 2012 recession start date (now adjusted forward by three months).
