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RecessionAlert: Weekly Leading Index Update

  • Written by Syndicated Publisher No Comments Comments
    August 30, 2016

    The latest index reading comes in at 16.4, up from the previous week’s revised 14.5.

    RecessionAlert has launched an alternative to ECRI’s Weekly Leading Index Growth indicator (WLIg). The Weekly Leading Economic Index (WLEI) uses fifty different time series from these categories: Corporate Bond Composite, Treasury Bond Composite, Stock Market Composite, Labor Market Composite, Credit Market Composite. RecessionAlert emphasizes that WLEI is a growth index and its data is no more than a week old, as is ECRI’s WLIg.

    Here is an excerpt from the description:

    Being a weekly growth index, it provides data with at most a 1-week lag, which is far more timely than the lag found on monthly economic indicators. Additionally, it is published on Thursday afternoons, a full 18 hours before the widely known ECRI Weekly Leading Index.

    As with all weekly indices though, the data is far more volatile than monthly or quarterly indicators and the WLEI components are therefore subject to more false positives (calling recession when one does not occur.). The WLEI is heavily weighed toward financial market data, but the obvious advantage of this is that data revisions are minor and isolated to the Labor Market Composite and small portions of the Credit Market Composite.

    RecessionAlert plans to add to the WLEI as they believe the categories are not broad enough to accurately predict all recessions. Link to description

    The first chart uses data going back to 1973 and includes recession starts.

    RecessionALERT WLI

    Here we’ve zoomed in to the turn of the century and added in the ECRI WLIg for comparison. As you can see, the ECRI indiciator has repeatedly shown conspicuous contractions between recessions, enough to make an erroneous recesison call while the WLEI did not trigger such a call. The recent slow growth and market volatility is clearly evident in the WLEI, but not necessarily the WLIg. However, both indicators are now generally in agreement in their directions of movement.

    RecessionALERT and ECRI WLI Growth

    Let’s look at the comparison with GDP growth since 1970. As you can see, not all negative GDP and slow growth has been matched by the WLEI, but all recessions match.

    RecessionALERT and ECRI WLI Growth

    Check back weekly as we watch this new indicator unfold and track economic health.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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