Investment

» ECRI - How Long In Advance Did ECRI Predict the Last Two Recessions?

In response to How Long In Advance Did ECRI Predict the Last Two Recessions? posted by Jas_Jain:

Through a long history of posts on this site, it seems clear that Jas has something of a vendetta against ECRI. I suspect this may have intensified as his own forecasts failed to play out as he expected.

Could it be that Jas has wanted us to predict a recession at various inappropriate times (even now?) and we have not obliged?

In the context of ECRI’s recession calls I will try, once again, to answer the general charge. Having read them through once, I see that Jas is trying to create straw men just so he can knock them down, i.e. some quote of someone paraphrasing ECRI, or, that our recession calls are based on a “rule” (that only Jas knows) using only one of our leading indexes.

As Jas’ March 18, 2006 7:00 pm post shows (Call it the Oil Recession, Sep. 2000) we warned of the coming recession six months in advance. Then on multiple occasions we reiterated that call, declaring in March 2001 that the recession was now “unavoidable.”

That was indeed our first recession call since 1990. But Jas tries to muddy the water by misleadingly quoting part of a May 2001 post to the effect that “we have not made an actual recession call since February of 1990.” As he knows very well, that quote was highlighting the fact that we don’t make recessions calls frivolously, and that it had been about a decade since our previous call.

We have a choice, whether to engage in an endless cycle of mendacious name calling as Jas seems to prefer, or let our record speak for itself and keep doing the actual work of real-time cycle forecasting.

-- posted by ECRI

» ECRI - Lifting the Lid: Wall Street spin turns bad news to good

http://today.reuters.com/investing/Finan...
By Pedro Nicolaci da Costa

NEW YORK, March 23 (Reuters) - Talk to Wall Street analysts after a weak batch of economic news and, as often as not, they say to look on the bright side.

But some critics say this view should be taken with a grain of salt. After all, most big banks failed to spot the 2001 recession until growth had already turned negative.

"The last thing investment banks want to do is predict a recession, because it's bad for business," said Lakshman Achuthan, managing director at independent research group Economic Cycle Research Institute, or ECRI.

Take two key sets of data released last week. The government said retail sales plunged by 1.3 percent in February, while the fourth-quarter current account deficit ballooned to a record $224.88 billion.

The chorus at the large investment banks? Don't worry about it. One month's data doesn't make a trend.

Like any other business, critics note, banks rely on sales -- and upbeat talk about the economy can't hurt when selling stocks and other investments.

The sunny disposition of Wall Street economists is clearly a far cry from the behavior of some stock analysts, who in recent years were prosecuted for recommending companies in exchange for lucrative investment banking business.

Still, consider Wall Street's economic outlook for 2006. The nearly unanimous view is that nothing can shake the American economy's resilience: not a housing slowdown, not rising interest rates, not record national deficits, not even unprecedented household indebtedness.

This camp sees business investment picking up the slack from an expected slowdown in consumer spending, allowing growth to ease gently rather than abruptly. They see expansion in gross domestic product slowing from an unusually strong 5 percent in the first quarter to a still-robust 3 percent by the end of the year, according to Reuters poll data.

"Good forecasts sell stock, bad ones don't," said Peter Morici, a professor at the University of Maryland's Robert H. Smith School of Business, whose own first-quarter growth outlook is far less optimistic at 3.9 percent. "On Wall Street, you're much better off erring on the positive side than on the negative."

In just the past week, Goldman Sachs , Lehman Brothers and Bear Stearns reported chart-busting quarterly profits amid booming demand for their brokerage and deal-advisory services. That is not all they have in common: Each has a higher-than-median forecast for 2006 GDP.

But independent ECRI sees a different picture. While refraining from publishing specific forecasts, they worry a recent retreat in prices of industrial materials like metals and natural gas could presage a softening of manufacturing activity in the second half of the year.

If that happens, such a deceleration could well coincide with a housing-related pullback in consumer expenditures.

"The not-too-hot, not-too-cold 'Goldilocks' economy envisaged by many economists could turn out to be a mirage," said Achuthan. "That would result in much weaker overall growth than generally anticipated this year."

Wall Street's tendency toward a positive economic outlook is not new. A review of more than a dozen forecasts collected by Reuters in January 2001 -- just before the economy slipped into its last recession -- shows that analysts at the big banks were unanimous in predicting solid GDP growth for that year.

In their own defense, some economists argue that Wall Street's perennial bullishness has more to do with the perils of forecasting than salesmanship.

"Economists are notoriously bad at predicting turning points," said Paul Kasriel, chief economist at Northern Trust. "They're like credit ratings agencies, they don't anticipate things very well."

-- posted by ECRI

» ECRI - WLI Edges Down

NEW YORK, March 24 (Reuters) - Slower housing activity and higher risk perception in the bond market caused a gauge of future U.S. economic growth to edge lower in the latest week, a report said on Friday.

The moves were partly offset by higher stock prices and lower jobless claims.

The Economic Cycle Research Institute, an independent forecasting group, said its weekly leading index edged down to 136.5 in the week to March 17 from a downwardly revised 136.7 in the prior week. The level was originally pegged at 136.8.

The annualized growth rate of the index fell to 2.6 percent in the latest week, compared with 3.0 percent the week before.

"Although the weekly leading index growth has eased to a 10-week low, U.S . economic growth prospects are still fairly positive," said Lakshman Achuthan, managing director at ECRI.

Kind regards,
Lakshman Achuthan
Read our book: Beating the Business Cycle:How to Predict & Profit from Turning Points in the Economy by Lakshman Achuthan and Anirvan Banerji of the Economic Cycle Research Institute (ECRI)

-- posted by ECRI

» ECRI - WLI Edges Up

NEW YORK, March 31 (Reuters) - Higher stock prices, stronger housing activity and lower jobless claims caused a gauge of future U.S. economic growth to edge up in the latest week, a report said on Friday.

The Economic Cycle Research Institute, an independent forecasting group, said its weekly leading index edged up to 137.0 in the week ended March 24 from a downwardly revised 136.2 in the prior week. The prior week's level was originally pegged at 136.5.

The index's annualized growth rate was flat at 2.3 percent in the latest week. The prior week's growth rate was downwardly revised to 2.3 percent from 2.6 percent.

"Although the weekly leading index growth has been easing since early February, U.S. economic growth prospects remain reasonably positive," said Lakshman Achuthan, managing director at ECRI.

Kind regards,
Lakshman Achuthan
Read our book: Beating the Business Cycle:How to Predict & Profit from Turning Points in the Economy by Lakshman Achuthan and Anirvan Banerji of the Economic Cycle Research Institute (ECRI)

-- posted by ECRI

» ECRI - US FIG Falls

NEW YORK, April 7 (Reuters) - U.S. inflation pressures fell in March due to softer loan activity and industrial commodity prices, a report on Friday said.

These moves were only partly offset by stronger job growth and slower vendor performance.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge (USFIG), which is designed to anticipate cyclical swings in the rate of inflation, fell to 121.3 in March from a downwardly revised 122.6. It was originally pegged at 123.1.

"The USFIG has now declined in four of the last five months, and is now at an eight-month low. Thus, there are tentative signs of some moderation in underlying inflation pressures," the report said.

"The level dropped more than a point which is a notable move, the USFIG is bucking the trend of today's employment report which came a little stronger than expected," said Lakshman Achuthan, managing director for ECRI.

The index's annualized growth rate, which smoothes out monthly fluctuations, fell to 0.3 percent from a downwardly revised 2.8 percent in February. The growth rate was originally pegged at 3.5 percent.

"If you step back ... underlying inflationary pressures are beginning to moderate," Achuthan said.

-- posted by ECRI

» Jas_Jain - 4/7/06 WLI Pushes Up

In response to 4/7/06 WLI Pushes Up posted by Kirk:

--

Vow! Double dose of good news for the bulls -- FIG falling and WLI rising.

Jas

-- posted by Jas_Jain

» Jas_Jain - ECRI's Monthly LEI at Ten Months Low of 1.3%?

ML Research; 04/20/06:

“…but we know that the ECRI LEI dipped 0.2% last month; is down for two consecutive months; and the y/y trend has throttled back to a 10-month low of 1.3%.”

It wasn’t long ago (two months) that Lakshman was exuberant over 20-month high for the growth rate or something like that. That growth rate was nothing but a blip.

It is safe to say that for the past two weeks WLI is not doing too well.

Jas

-- posted by Jas_Jain

» SteveT - Lakshman Bloomberg interview

Matt Nesto of Bloomberg interviewed Lakshman Achuthan in San Francisco this morning.

Matt started saying ECRI claims the jobs number can be misleading about the direction of future inflation. He asked Lakshman what he is seeing that the consensus isn’t?

ECRI’s Future Inflation Gauge (FIG) focuses on looking for directional changes in the inflation cycle ahead. It looks at many drivers and the payroll jobs number is the grand daddy. It does however have a pretty bad record by itself. It misses about a 1/3 of all turns in inflation. It often gives false signals too. Lakshman wouldn’t put entire credence into a strong move up or down in the jobs numbers today as a sign of inflation. This is not to say the jobs number isn’t an important driver of inflation but you do have to be careful when selecting indicators and validate them against non-employment leading indicators of inflation.

Matt then asked what is the “FED Factor” on today’s numbers if new jobs come in around 200,000 or above?

Lakshman said the market is likely not to change its mind based on what he says. If it did come in a little over 200,000 they may feel it is a little bit inflationary. It could explain some of the recent “Dovish” comment recently from the FED. Lakshman said the basic under lying inflation pressures are in a downward trend and have been for a few months now. He doesn’t think today’s report is likely to change the trend. Lakshman is going to be looking closely at the manufacturing jobs number within the report, that hasn’t been getting much attention lately. The past few months it seems to be weakening a bit. It maybe anecdotally at this point but is showing signs of a softening Global industrial slowdown. ECRI has Global Long Leading Indicators that cover 85% of the world economy and that is very clearly pointing to a cyclical downturn and that doesn’t seem to be on many radar screens.

Matt then displayed a US Future Inflation Gauge chart. Lakshman pointed to the high point of October 2005 and since then four of the past five months show lower readings. The FIG includes all of the key drivers of the inflation cycle; the jobs market, money in circulation, bottlenecks in the production process, commodity prices, and International currencies. Any of these areas can give inflation or disinflationary impulses but added together it yields an objective FIG. The bottom line now, underlying inflation pressures are easing.

Matt asked for a growth forecast the second half of this year and early 2007. Lakshman is seeing some softness, not a recession but it is likely to be a disappointment to those expecting near 4% GDP.

Matt asked about hints by the FED that the end of rate hikes is near.

To finish up Lakshman said he takes the FED at their official word.

-- posted by SteveT

» SteveT - Gauge of U.S. economy slips in latest week

http://today.reuters.com/business/newsar...

Fri May 19, 2006 10:36 AM ET

NEW YORK (Reuters) - Higher jobless claims and slower money supply growth caused a gauge of future U.S. economic growth to slip in the latest week, a report said on Friday.

These moves were largely offset by higher stock prices.

The Economic Cycle Research Institute, an independent forecasting group, said its weekly leading index edged down to 137.6 from 138.3 in the week ended May 12.

The index's annualized growth rate was 3.4 percent in the latest week. The prior week's growth rate was revised to 3.4 percent from 3.3 percent.

On a monthly basis, annualized growth quickened to 2.7 percent, from 2.1 percent.

"With weekly growth improving over the past couple of months, the outlook for U.S. economic growth remains positive," said Lakshman Achuthan, managing director at ECRI.

-- posted by SteveT

» ECRI - Japan FIG near eight-year high

TOKYO, June 2 (Reuters) - Japanese inflation pressures were flat in April but hovered near an eight-year high and would likely increase, the Economic Cycle Research Institute said.

ECRI's Future Inflation Gauge for Japan was unchanged at 98.6, down from the eight-year peak of 98.9 struck in February. "Japanese inflation pressures remain elevated," the U.S.-based institute said on Friday.

-- posted by ECRI