The Economic Cycle Research Institute (http://www.businesscycle.com/) has reported further stabilization or decline in its publicly-disclosed weekly leading index. This blog has reported on ECRI many times; it has a fine track record till now; thought it was late to see the implosion last summer. In any case, here's today's Reuters report on ECRI:
WLI Growth Eases from Record High
November 13, 2009
(Reuters) - A weekly measure of future U.S. economic growth slipped to an 8-week low, sending its yearly growth rate further off record levels reached seven weeks ago, a research group said on Friday.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index edged down to 127.3 in the week to Nov. 6, from a downwardly revised 128.7 the previous week, which the group originally reported as 128.8.
The index's yearly growth rate fell to a seven-week low of 25.3 percent from 26.2 percent last week, which was revised lower from an original 26.3 percent.
ECRI has recently projected that the recovery will be the fastest since the early 1980s, and said the current report is in step with that forecast.
"For four straight weeks WLI growth has eased from a record high, but still remains consistent with a further near-term acceleration in U.S. economic growth," said ECRI Managing Director Lakshman Achuthan.
The weekly index was pushed down by lower commodity prices, Achuthan said.
DoctoRx here. I have done an extensive review of ECRI's data regarding stock prices and pauses in the growth of the WLI. There's not a great correlation. Where there appears to be a correlation is that stock prices follow the acceleration of the WLI, i.e. the "yearly growth rate". With that having moderated, perhaps another light finger has pressed on the scale in favor of a pause or decline in stock prices.
More important IMO are statistical analyses such as those by Jeremy Grantham, Andrew Smithers and even PIMCO, all concluding that stocks (Grantham and Smithers) and financial assets in general, are overvalued.
Getting back to ECRI, though, one wonders if the concern about the massive governmental "stimulating" of the economy will prove well-founded from an investment standpoint. For all we know, the economy starts surging on its own. Evidence that that surge may well happe- even if only a brief one- comes from the various news reports that yet another "stimulus" plan is in the works.
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