ECRI: THE RECOVERY IS EASING
For a group that has been pounding the table over the unstoppable recovery they appear to be tempering their outlook a bit. The ECRI is now reporting that the economic recovery is easing, but should see continued strength ahead:
(Reuters) – A weekly measure of future U.S. economic growth rose in the latest week while its yearly growth rate edged lower, indicating that the economic recovery, while easing, is still poised to strengthen in the near term, a research group said on Friday.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index ticked up to 128.4 in the week to Oct. 23 from 127.9 the previous week.
The index’s yearly growth rate fell to 26.9 percent from 27.2 percent last week. ECRI has recently reported annualized economic growth at all-time highs.
“Despite coming off its early-October record high, WLI growth remains robust, suggesting that the U.S. economic recovery will continue to gather strength in the coming months,” said ECRI Managing Director Lakshman Achuthan.
The weekly index was up due to higher commodity prices, Achuthan said. The growth rate is derived from a four-week moving average, and occasionally moves inversely to the weekly index level.
Source: ECRI
Jim Grant wrote one of his longest pieces of the year using ECRI’s forecast as the basis for his own (bullish) forecast. I was so irritated by the piece that I nearly canceled my subscription. Not that I want the economy to fall over, but I think the ECRI information takes into account elements that have been artificially inflated (car prices, house prices, stock prices, commodity prices) which will surely all take a tumble as people realize the “recovery” is a mere bouncing along the bottom (which is good, I guess, but not a recovery at all).
I am VERY skeptical of this ECRI data. It appears to have an incredibly high correlation with the stock market. The market dips, the ECRI dips. The market rises, the ECRI rises.
What good is that?
note that the reporter said “easing,” not ECRI
Breaking news on CNN:
“White House says 650,000 jobs were created or saved by $150 billion in stimulus funds.”
That is a cost of ONLY $230,769 per job. Since all the jobs saved were on Wall Street, that is a great bargin!!!! The White House should be PROUD! Good work!!!!! (What the hell as they smoking?)
Hey all,
Whether you believe in ECRI’s and Jim Grant’s methodology — at this point in time — turns on whether you think the government can restart the credit cycle by levering itself (e.g., borrowing to do cash for clunkers), by levering consumers through financing from GSEs (e.g., FHA), and by persuading companies to leverage themselves in LBOs by themselves or due to activist investors or private equity. And how long consumers and banks can keep a lid on interest rates due to increasing their purchases of US treasuries, and how long foreign central banks will continue to support treasuries and the dollar.
If the government can’t increase leverage enough to start a new credit cycle, or if consumers, banks, and foreigners lose their appetite for treasuries or the dollar, their forecast falls apart. Further, unless the net increase in leverage is big, it is hard to see big time growth (given the rest of world isn’t in shape to import a ton of US products). Moreover, down the road, there can be an even bigger crash unless the additional leverage is used to make worthwhile investments that grow the economy, as opposed to useless crap.
Joe makes a good point. But I think the pendulum has now swung firmly against additional stimulus and additional QE. The American public cannot take the market’s reaction after oil breaks $100 and gold has a breakout. It would spook everyone a lot more than the market just selling off back down to the early July levels, which is where the market belongs. It is depressing but it isn’t a runaway train like the perception of endless money printing.
joe
Well said. And the debt is indeed the big factor that ECRI doesn’t seem to take into account. And so their methodology worked great during the great leveraging of the last couple of decades, but this is likely to be their downfall here. They’re sure laying it all out on the line, that’s for sure. They’ll either be hailed as the contrary geniuses of our time, or thoroughly discredited for their foolishness, by the time this is over with.