Friday brought a number of data points including third quarter GDP, the Chicago Purchasing Manager’s Index, and a few other odds and ends. And while those are worth dissecting as well, perhaps the most important piece of news came out of the Economic Cycle Research Institute (ECRI) on Thursday. We have been closely following the ECRI’s Weekly Leading Index (WLI) since the summer, when it ticked down to levels that have typically led business cycle contractions.
Over the last month or so the ECRI WLI has stabilized, and the director of ECRI had been saying that the next move in the index would prove to be critical in clarifying whether the current slowdown would degenerate into a contraction or not. At long last they have come down with the verdict, and have issued the following statement which can been found on their website (http://www.businesscycle.com/news/reports/1990): “That is the message from the leading business cycle indicators, which are unmistakably veering away from the recession track, following patterns seen in post-World War II slowdowns that didn’t lead to recession.” When combined with other leading indices that have already rebounded, like copper prices, the CRB spot price commodity index, and the Conference Board's Leading Economic Indicator, this is an important piece of confirming evidence that the cycle is stabilizing, even if it’s at a low level of growth.
What to do with this new piece of evidence, now that will be the topic of much discussion this week.
