ECRI - Economic Cycle Research Institute

Professional Report Excerpt

Flashback to February 2010

ECRI’s Lakshman Achuthan discusses our forecast of a cyclical downturn in growth by mid-year. At the 25-second mark Carl holds up a printout of our Long Leading Index with the S&P 500 and our Coincident Index.



Excerpts from ECRI professional reports:

January 2010 “The U.S. Long Leading Index (USLLI) growth rate, which had soared to a 63-year high in September, is now in a cyclical downturn… This means that U.S. economic growth is likely to start easing by mid-year…In this context, it is also notable that cyclical downturns in stock prices (a short leading indicator) have almost always followed post-recession cyclical downturns in USLLI growth…In sum, the U.S. economy is moving off the sweet spot and entering a higher-risk environment.”

February 2010 ECRI goes on public record about implications of upcoming slowdown (CNBC clip above).

March 2010 “With stronger U.S. economic data discrediting the doubters, double-dip talk has dried up. Not surprisingly, most economists are marking up their growth projections for 2010 and beyond. As usual, such prognosticators are focused largely on coincident economic indicators, which they then extrapolate. This is why there was so much fear of depression last spring, when we forecast a growth rate cycle upturn, based on our objective leading indexes.

Having correctly predicted an upturn in economic growth in the face of widespread skepticism a year ago, those leading indexes are now anticipating a near-term cyclical peak in U.S. economic growth. Specifically, growth in the U.S. Long Leading Index (USLLI) has declined for five straight months to a ten-month low… The directional unanimity among our sector-specific leading indexes is striking. Just as compelling are the successive downturns in USLLI growth, WLI growth and USSLI growth, which are providing sequential signals of an upcoming growth rate cycle downturn for the overall economy – precisely as expected… (Thus), even as people are starting to believe that the perfect storm has ended, clouds are gathering on the horizon.”

April 2010 “There is no doubt that USLLI growth is in a post-recession cyclical downturn… (O)ur forecast of a growth rate cycle downturn by mid-year remains fully intact. With the markets growing increasingly confident about a sustained acceleration in U.S. economic growth in the coming months, this highlights a potential divergence between ECRI’s outlook and growing market optimism.”

May 2010 “The risk of a cyclical downturn in stock prices has risen significantly. Moreover, we are approaching the most dangerous period of the business cycle to employ a buy-on-dips strategy.”