ECRI Weekly Leading Index Update - Saturday, May 18

Friday morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 146.7, down 0.2 from the previous week. Year-over-year the four-week moving average of the indicator is now at -1.84%, down from last week. The WLI Growth indicator is now at 0.25, also down from the previous week.

"GDP Data Tells You Nothing About Recession Risk"

ECRI's latest article discusses GDP's ability to predict recessions in real-time. It is more of a lagging indicator, as revisions will later reveal the true nature of the economy at that time. "In principle, GDP is a coincident indicator of the economy, with no real predictive value. But because more than half of the initial GDP estimate is based on survey data and the extrapolation of recent trends, the initial vintages of GDP are often misleading, especially around business cycle turning points." ECRI stresses the importance of having good leading indexes as alternatives. 

The ECRI Indicator Year-over-Year

Below is a chart of ECRI's smoothed year-over-year percent change since 2000 of their weekly leading index. The latest level is above where it was at the start of the last recession.

WLI since 2000

RecessionAlert has an alternative to ECRI's WLIg, the Weekly Leading Economic Indicator (WLEI), which uses 50 different time series from various categories, including the Corporate Bond Composite, Treasury Bond Composite, Stock Market Composite, Labor Market Composite, and Credit Market Composite. An interesting point to notice — back in 2011, ECRI made an erroneous recession call, while the WLEI did not trigger such a premature call. Both indicators generally move in the same direction, but the WLEI less volatile. Frequently the latest RecessionAlert data is not available at publish time and will be posted at a later point.

Appendix: A Closer Look at the ECRI Index

The first chart below shows the history of the Weekly Leading Index and highlights its current level.

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