ECRI (businesscycle.com) guys hedging their bets even further. I get the feeling they are getting real close here to calling a double dip.
"The August 9 ECRI WLI resumed its decline, nearly erasing the previous week's gain. The decline is particularly worrisome since it comes despite growth in the
stock market, which was previously keeping the index stagnant. Other components of the index, such as commodity prices are now the primary drag on the WLI.
The lack of steady and continued improvement in initial jobless claims is also keeping the WLI's performance weak.
The six-month growth rate of the WLI, which uses a four-week moving average to smooth out volatility, continued along its downward spiral this past week. At
1.5%, it is now only barely indicating expansion for the economy. Risks for the economy are substantial, and the possibility of a second period of contraction is
rising. The growth rate is now the lowest it has been since December 2001.
The index has now clearly formed a downward path, after staying essentially stagnant during the first half of 2002. While the weakness was initially due to the
stock market, it is now clear that other areas of the economy are suffering. Because more of the WLI's components are performing poorly, the forward looking
propensity of the index carries more weight. The economy is clearly facing a challenge to its recovery, and it is unclear if consumers and the real estate market can
support the economy long enough to stave off a return to recession.
The WLI is a leading indicator, and is made up of several components, including money supply, equity and bond markets, jobless claims, and commodity prices.
The WLI typically leads upswings in the economy by about three or four months. Significant improvement in the index in November did in fact predict the current
recovery. The WLI predicts downturns over a larger time frame, between 6 and 9 months." |
