The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.8, up from the previous week’s 135.5. The WLI annualized growth indicator (WLIg) dropped to 3.8 from the previous week’s 4.1.
ECRI has been at the center of a prolonged controversy since publicizing its recession call on September 30, 2011. The company had made the announcement to its private clients on September 21st. ECRI’s cofounder and spokesman, Lakshman Achuthan, subsequently forecast that the recession would begin in Q1 2012, or Q2 at the latest. He later identified mid-2012 as the start of the recession. Over the past two years he has been a frequent guest on the likes of CNBC and Bloomberg TV. In recent months he has adjusted the company’s position, identifying the recession’s “epicenter” as the half-year spanning Q4 2012 and Q1 2013.
ECRI’s Latest: “Cognitive Dissonance at the Fed?”
Somewhat surprisingly, the general public heard nothing from Mr. Achuthan following last Friday’s Advance Estimate for Q2 GDP, which came in above expectations at 4.0%. The most recent public commentary from ECRI remains its May 30th brief overview of post-recession GDP forecasts from the Fed’s Open Market Committee and the less optimistic series from the Congressional Budget Office.
The ECRI Indicator Year-over-Year
Here is a chart of ECRI’s data that illustrates why the company’s published proprietary indicator has lost credibility as a recession indicator. It’s the smoothed year-over-year percent change since 2000 of their weekly leading index. I’ve highlighted the 2011 date of ECRI’s original recession call and the hypothetical July 2012 business cycle peak, which the company previously claimed was the start of a recession. I’ve update the chart to include the “epicenter” (Achuthan’s terminology) of the hypothetical recession.
