Investment

» ECRI - WLI Slips Further

NEW YORK, Aug 25 (Reuters) - A gauge of future U.S. economic growth held steady in the latest week, a report showed on Friday, although its annualized growth rate fell close to a 3-1/2-year low.

"The Weekly Leading Index growth has now dropped to a 179-week low, further dimming U.S. economic growth prospects," said Melinda Hubman, research associate at the Economic Cycle Research Institute, an independent forecasting group.

The index's annualized growth fell in the latest week to negative 1.6 percent. The prior week's growth rate was unrevised at negative 1.4 percent.

ECRI said its weekly leading index was 135.2 in the week ended Aug. 18, equal to last week's downwardly revised level.

The weekly index was unchanged "as higher stock prices offset lower commodity prices and lower housing activity," Hubman said.

-- posted by ECRI

» Jas_Jain - ECRI’s WLI Index Signals US Recession In Four Months

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ECRI’s WLI Index Signals US Recession In Four Months

But, don’t expect ECRI (Economic Cycles Research Institute) economists to make a recession call until the economy is already in a recession, as was the case last time around in 2000-01.

So, how am I calling for a recession using ECRI data witch such precision?

The WLI Index is a growing series, just like the GDP, but it grows at a slower rate, around 2% a year, than the real GDP. It also fluctuate lot more than the GDP. Currently the index is BELOW where it was 28 months ago! Last time that the growth over a 28-month period was negative, in the previous cycle, was in late November of 2000 and the economy entered the recession in March 2001. BTW, THIS (NEGATIVE GROWTH OVER A 28-MONTH PERIOD) HAS CORRECTLY CALLED ALL THE RECESSIONS FOR THE 39 YEARS FOR WHICH I HAVE THE DATA AND NO FLASE ALARMS (DURING MID 1990s THE GROWTH NEVER FELL BELOW 2%). This fits like a glove to my forecast of the recession to begin in December 2006, give or take a month.

BTW, if one takes a long-term view of the index one can clearly see that the Scam Market is in a Secular Bear Market. Maybe, I will publish a graph to that effect some time in the future.

Jas

-- posted by Jas_Jain

» Jas_Jain - ML: ECRI Index Brings Bad New For Scam Lovers

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Bad New For Scam Lovers

David Rosenberg of ML (08/28/06):

“ECRI pretty tight with S&P too. We found a relationship even better than the NAHB with the S&P 500. Try the ECRI (Economic Cycle Research Institute) leading index. A 90% correlation which points to at peak at hand. The ECRI leading growth index slipped to -1.6% as of the August 18th week from -1.4%, the weakest in 3½ years.”

I think that Scam Market bulls have at the most two months to completely get out. Waiting for the WLI growth rate to fall to -5.0% ain't smart.

Jas

-- posted by Jas_Jain

» SteveT - ECRI’s WLI Index Signals US Recession In Four Months

In response to ECRI’s WLI Index Signals US Recession In Four Months posted by Jas_Jain:

Jas, I have not gone back and double checked and if I'm wrong I'll apologize now.

Are you sure you got your dates right? I was thinking the last "recession" started and ended in 2002.

-- posted by SteveT

» Jas_Jain - ECRI’s WLI Index Signals US Recession In Four Months

In response to ECRI’s WLI Index Signals US Recession In Four Months posted by SteveT:

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"Are you sure you got your dates right?"

Hello Steve,

I have done SO MUCH research on recessions in the past twelve months that I remember the dates better than most people remember birthdays of their loved ones.

Here is cut-and-paste from official source:

March 2001(I) to November 2001 (IV)

Get ready for a recession soon, Steve. Only those in denial can't see it coming soon.

Jas

-- posted by Jas_Jain

» SteveT - ECRI’s WLI Index Signals US Recession In Four Months

In response to ECRI’s WLI Index Signals US Recession In Four Months posted by Jas_Jain:
I stand corrected.

-- posted by SteveT

» ECRI - NYT: Fork in the Road

As many of you know, ECRI’s founder, Geoffrey H. Moore, was a very special person. I would like to call your attention to the front page of today’s New York Times business section that echoes this sentiment, and includes a picture of Dr. Moore at work.

ECRI continues to build on Dr. Moore's legacy and is pleased to announce that we have joined with Professors Clive Granger (2003 Nobel Laureate in Economics), Adrian Pagan and Allan Layton to work on a multi-year research project supported by The Australian Research Council to investigate the transmission of international business cycles.

Here is a link to today's article to see the picture of Dr Moore.: http://www.nytimes.com/2006/08/30/busine...

A Forecast for a Fork in the Road

NEARLY six years ago, when most forecasters were still whistling past the graveyard, a small outfit in New York known as the Economic Cycle Research Institute said the 1990’s boom was over and made a recession call. With factory orders plummeting and goods piling up in company warehouses, the institute said big job cuts were sure to follow.
It was a pretty gutsy move at the time. Alan Greenspan, then the Federal Reserve chairman, and just about every major Wall Street firm were saying in early 2001 that the Fed’s aggressive interest rate cuts would lift consumer spending and prevent a recession. In truth, one had already begun.

An economist named Geoffrey H. Moore founded the institute in 1996, at the age of 82, after a long career in academia inventing some of the leading indicators that are still used to forecast the economy’s direction. He had been a student of one future Fed chairman — Arthur Burns, a founder of business-cycle analysis; and a teacher of another — Mr. Greenspan, who took Dr. Moore’s Statistics I class at New York University in 1946. A half-century later, Mr. Greenspan told Congress that he closely followed all of Dr. Moore’s work (though perhaps not closely enough).
Dr. Moore wasn’t perfect, but he was quite good. His formulas, which bested Wall Street’s rose-colored forecasts by relying on historical patterns, predicted the downturns of both the early 1980’s and early 1990’s and didn’t make an incorrect recession call in either decade. After he died in 2000, his former colleagues predicted the 2001 recession using the indicators he’d created.
The economy has now come to one of those turning points that Dr. Moore loved. When this summer began, growth was moving along at such a nice clip that the Fed was trying to slow it down to keep inflation in check. But as Labor Day and the unofficial start of the work year arrive next week, the situation feels very different.
The long-feared housing slump is here. Automobile sales have been falling. Gas still costs more than $2.80 in most of the country. The shopping slowdown that had already hit Wal-Mart has spread to more upscale chains like Starbucks and Whole Foods, as Daniel Gross first pointed out in Slate magazine.

Perhaps most telling, the people at the Economic Cycle Research Institute are getting nervous. “We’re not calling for a recession yet,” Lakshman Achuthan, the institute’s managing director, told me. “But the risks to the economy have materially increased.”
ADD his concern to some other indicators starting to flash red, and I think it’s reasonable to put something close to 50-50 odds on a recession starting sometime in the next year.
There are two big reasons you aren’t hearing this from Wall Street’s experts or, for that matter, the Fed’s. The first is that they are all in the optimism business. Investment firms sell stocks and make mergers happen, and doing so is a lot harder if they’re also telling people that the economy is about to tank.
The Fed, meanwhile, carries enormous prestige, and if its top officials talked about the possibility of a recession, they could spook households and businesses into causing one. Besides, it is part of their job to prevent recessions, so they tend to believe that they are succeeding.
The second main reason has nothing to do with self-interest. Recessions, often defined as two consecutive quarters in which the economic output declines, are simply hard to call. They are a result not just of economic fundamentals like rising inventories but also of psychology. The moment an executive decides that the economy is slowing and opts not to order a new computer server, she makes a downturn more likely. A homeowner who gives in and finally cuts the asking price on his house does the same.
Economists often pick up on these subtle shifts, even if they don’t put the pieces together. Every three months, the Philadelphia Fed surveys about 50 economists, mostly from Wall Street, and asks for their forecasts, which are almost always sunny. But, fortunately, the Fed also asks them to put a percentage on the chances that the economy will shrink in each of the next five quarters.

These percentages make up something I named the Anxious Index a few years ago, a term the Fed has since adopted, and the index has been far more prescient than the economists’ headline forecasts. Since 1968, when the forecasters have said that there is a 30 percent chance or better that the economy will shrink in the following quarter, it almost always has. (The 1987 stock market crash, which didn’t produce a recession, is the one exception.)
In the most recent survey, released Aug. 14, the economists put only a 10 percent chance on a downturn in the fourth quarter of this year. Further out, however, they were less confident. They said there was a 16 percent risk that the economy would shrink two quarters from now. About 40 percent of the time they have gotten this anxious in the past, a recession has started at some point during the following year.
This cycle is probably even harder to predict than most, because of the mix of economic strengths (like the healthy balance sheets of banks and companies) and weaknesses (like the iffy balance sheets of consumers). Not even the job market offers a clear picture, which makes the Fed’s job trickier. If you look at highly skilled jobs, be they in engineering or general contracting, the economy seems quite strong, as Ben Bernanke, the Fed chairman, has said. But for workers without college degrees or specific training, this looks a lot like a slump.
In its annual report on the economic state of the nation, the Census Bureau said yesterday that median household income rose 1.1 percent last year, after adjusting for inflation, but the increase was apparently a result of payments that come from the government and from investments, not from paychecks. The earnings of full-time workers failed to keep up with inflation.

At the Economic Cycle Research Institute, the forecasters have noticed that the last six months bear a striking resemblance to two different kinds of periods: the run-up to a gentle slowdown, like those of the mid-1980’s and mid-90’s, and the run-up to recession. In both situations, consumer expectations fall while interest rates and inventories rise, which has already begun to happen. But the two paths — slowdown and recession — historically diverge sometime after the six-month mark. Starting Friday, with the August employment report, we will begin to get a sense of which road we’re going to take.
I hope you enjoyed your summer.

E-mail: leonhardt@nytimes.com

-- posted by ECRI

» Normxxx - NYT: Fork in the Road

In response to NYT: Fork in the Road posted by ECRI:

Do include a look at the seasonal influence on the markets in your "multi-year research project supported by The Australian Research Council to investigate the transmission of international business cycles."

According to previous research, the seasonal influence was evident in 38 of 39 countries studied. Moreover, its influence seems to go back as far a records are kept --to the 1600s in the UK.

-- posted by Normxxx

» ECRI - WLI Flat

10:30 01Sep2006 RTRS-ECRI US LEADING ECON INDEX FLAT AT 135.1 IN AUG 25 WEEK VS REVISED 135.1 IN PRIOR WEEK

10:30 01Sep2006 RTRS-ECRI US INDEX ANNUALIZED GROWTH RATE -1.7 PCT IN AUG 25 WEEK VS REVISED -1.7 PCT IN PRIOR WEEK

10:30 01Sep2006 RTRS-Gauge of U.S. economy flat in latest week - ECRI

NEW YORK, Sept 1 (Reuters) - A gauge of future U.S. economic growth was unchanged in the latest week, a report showed on Friday, with its annualized growth rate also flat.

Annualized growth in the week ended Aug. 25 held steady at negative 1.7 percent, according to the Economic Cycle Research Institute, an independent forecasting group. The prior week's growth rate was revised downward from negative 1.6 percent.

But the flatness of the annualized growth "doesn't override or reverse the downward momentum that we've seen" recently, said Lakshman Achuthan, a managing director at ECRI.

The flatness of the leading index was due to declines in commodity prices and housing activity being neutralized by higher stock prices and lower bond yields, Achuthan said.

ECRI said its weekly leading index was flat at 135.1 in the week ended Aug. 25 from a downwardly revised 135.1 in the prior week. It was originally pegged at 135.2.

"With weekly leading index growth in a clear cyclical downswing, U.S. economic growth prospects remain dull," Achuthan said.

-- posted by ECRI

» ECRI - FIG dips

11:10 01Sep2006 RTRS-ECRI US INFLATION GAUGE FALLS TO 123.1 IN AUGUST FROM 124.0 IN JULY

11:10 01Sep2006 RTRS-ECRI US INFLATION INDEX ANNUALIZED GROWTH RATE -0.7 PCT IN AUGUST VS REVISED 1.1 PCT IN JULY

11:10 01Sep2006 RTRS-U.S. inflation pressures fell in August - ECRI

NEW YORK, Sept 1 (Reuters) - U.S. inflation pressures fell in August due to lower commodity prices, slower growth in home loans and faster vendor performance, a report showed on Friday.

The dip in inflation pressures was offset only partly by slightly higher moves in interest rates and jobs growth.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge, or USFIG, which is designed to anticipate cyclical swings in the rate of inflation, fell to 123.1 in August from 124.0 in July.

"While the USFIG is clearly below its October high, it has not dropped decisively. Thus, underlying inflation pressures have ebbed somewhat since the fall, but remain somewhat elevated," said Lakshman Achuthan, managing director for ECRI.

The October 2005 level was 126.5, its recent peak, Achuthan said.

The index's annualized growth rate, which smooths out monthly fluctuations, fell to negative 0.7 percent from a
downwardly revised 1.1 percent in July. The growth rate was originally pegged at 1.7 percent.

-- posted by ECRI