Friday, May 22, 2009

ECRI: WLI Growth At 35-Week High

Those, who do not believe in green shoots, should listen to ECRI (my emphasis):

Reuters, May 22, 2009 (Reuters) - A measure of U.S. future economic growth inched higher in the latest week, while its yearly growth rate continued to climb toward positive territory, a research group said on Friday.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index edged up to a 29-week high of 111.1 for the week ending May 15 from 111.0 the prior week.

The index's annualized growth rate reached a 35-week high of minus 11.5 percent from last week's rate of minus 13.6 percent.

It was the highest yearly growth reading since the week ended September 12, when it stood at minus 11.4 percent."With WLI growth rising steadily to a 35-week high, it is increasingly obvious that the 'green shoots' will blossom this summer," said Lakshman Achuthan, managing director at ECRI.

The group's index rose because of lower interest rates and higher commodity prices, and was partly offset by weaker housing activity, Achuthan said.


Well, their methodology failed, or, more precisely said, the forecast was interrupted, during Great Depression. But who believes we face something similar to ...? Not necessarily the U.S. is the weakest link these days? As long as the U.S. is able to raise money for their banks, whatever way, one should be worried about other geographic locations ...

I should put a chart here for a better visualization ...

UPDATED: Someone is suggesting to me that "their methodology did not fail". Well, their current "marketing" of " imminent recovery" may fail ... it is, probably, a fairer representation of my current view.

4 comments:

  1. You should also quote then correctly -- their methodolgy didn't "fail." Rather, a growth rate cycle upturn was not soon followed by the end of the recession. In fact, their Long Leading Index turned down prior to the plunge into depression. All this is from their homepage www.businesscycle.com.

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  3. Keep in mind this: http://www.businesscycle.com/news/press/1399

    Upturn Ahead?

    Business Week
    April 25, 2009
    (BW) - File under Good News That Could Turn Bad: An index developed decades ago by the independent Economic Cycle Research Institute suggests the economy may recover before yearend.

    The growth rate of the Weekly Leading Index—composed of forward-looking indicators for sales, jobs, income, and output—has improved by a third from its Dec. 5, 2008, low of roughly -30%. While the rate is still negative, says Lakshman Achuthan, the institute's managing director, the uptick "has us forecasting an economic upturn."

    In 16 of the last 17 U.S. downturns, a climb like this one was followed by recovery in about four months, Achuthan says. The exception: In 1930, after months of climbing, a similar index used by the institute went south, and so did the economy—into the Great Depression.


    This time around there may be factors that are not captured by ECRI ... i acknowledge that postive feedback loop has a strong psycho effect... in this regard surveys have several problems to capture that ... so think of green shoots but do not forget the risks ... and US is not the entire world.

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  4. To Anonymous
    I really like this: " ... their methodolgy didn't "fail." Rather, a growth rate cycle upturn was not soon followed by the end of the recession."

    Indeed, stupid economy!

    Let's hope we will be alerted by LLI, as "In fact, their Long Leading Index turned down prior to the plunge into depression.

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