The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.1, down from the previous week’s 132.5. The WLI annualized growth indicator (WLIg) is at -2.8, down from -2.1 the previous week.

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.

The Agony and the Ecstasy

ECRI’s latest public commentary remains its November 5th piece with the allusive title The Agony and the Ecstasy, from Irving Stone’s 1961 best-selling historical novel, which became a popular 1965 film starring Charlton Heston as Michelangelo. Here is a link to the ECRI commentary.

Actually ECRI’s immediate reference is to a speech on the UK economy by Andrew Haldane, the Bank of England’s chief economist. Haldane’s perspective is nicely summarized by The Telegraph.

ECRI shifts the focus from Haldane’s concept of economic agony and ecstasy in UK to an interesting concept of agony and ecstasy in the US economy, which includes this fascinating graph.

The ECRI Indicator Year-over-Year

Below 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.


As for the disconnect between the stock market and the mid-2012 recession start date, Achuthan has repeatedly pointed out that the market can rise during recessions. See for example the 2:05 minute point in the November 4th video. The next chart gives us a visualization of the S&P 500 during the nine recessions since the S&P 500 was initiated in 1957. I’ve included a dotted line to show how the index has performed since ERIC’s original July 2012 recession start date (now adjusted forward by three months).

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