By Jill Mislinski

Yesterdays’s release of the publicly available data from ECRI (Economic Cycle Research Institute) puts its Weekly Leading Index (WLI) at 131.4, up from 131.1 the previous week. The WLI annualized growth indicator (WLIg) is at -0.6, unchanged from the previous week, and well off its interim low of -4.7 in mid-January.

Al Jazeera Interview

ECRI’s latest feature is an Al Jazeera interview with Lakshman Achuthan discussing the recent Fed rate hike to 0.25% and their plan to raise rates fractionally over the coming year. Achuthan says this plan to raise rates continuously is unusual and that the Fed really raised rates in event they would need to lower them again, so as not to put rates into negative territory as some European countries have done.

See the video here.

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.

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.

For a better understanding of the relationship of the WLI level to recessions, the next chart shows the data series in terms of the percent off the previous peak. In other words, a new weekly high registers at 100%, with subsequent declines plotted accordingly.

As the chart above illustrates, only once has a recession ended without the index level achieving a new high — the two recessions, commonly referred to as a “double-dip,” in the early 1980s. Our current level is still off the most recent high, which was set back in June of 2007. We’ve exceeded the previously longest stretch between highs, which was from February 1973 to April 1978. But the index level rose steadily from the trough at the end of the 1973-1975 recession to reach its new high in 1978. The pattern in ECRI’s indictor is quite different, and this has no doubt been a key factor in their business cycle analysis.