Recent ECRI Statements

In this post I would like to highlight ECRI and some of its recent statements, after which I will make comments.

From a recent (7/14/09) Newsweek story, quoting ECRI, found here:

http://www.businesscycle.com/news/press/1481/

"From our vantage point, every week and every month our call is getting stronger, not weaker, including over the last few weeks," says Achuthan. "The recession is ending somewhere this summer."

I found the following phrase on this ECRI site link to be interesting:

http://www.businesscycle.com/about/approach/

"The emphasis is on the development of leading indexes that hold up in spite of structural changes..."

And finally, this is interesting from the ECRI website:

http://www.businesscycle.com/

"In fact, over the last 75 years, growth rate cycle upturns during every recession were followed zero to four months later by the end of the recession itself. No exceptions."

"Actually, there’s been only one solitary exception in the data we have examined, which go back well over a century. This was the growth rate cycle upturn of 1930-31, which gave way to a renewed downturn. But, when this growth rate cycle upturn was beginning at the end of 1930, USLLI growth was turning back down, warning that the firming in growth would soon be reversed, effectively opening the door to depression. That’s not the case today."

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My comments: There is a lot I could say regarding my views on ECRI's methodologies and current views.

For now, I will say that as previously stated on this blog, I believe (and my analysis indicates) that we are in a "new (economic) environment." Whether ECRI's methodologies yield the correct interpretation of our current economic environment will of course play out with time. This is something that I plan on watching closely...

As an aside, I've been wondering about the following...If a (U.S.) central banker or other main policymaker were to wholeheartedly believe in the methods and long-term predictive ability of ECRI's methodology, wouldn't it make sense, especially under a very stressful, uncertain economic situation, to try to craft policy in line with that which would promote strong ECRI leading (WLI & USLLI) growth - under the assumption that economic recovery would follow?

SPX at 927.66 as this post is written


Copyright 2009 by Ted Kavadas