ECRI and the WLI Index

by Marilou Long on August 5, 2010

in Economic Indicators,Recommended Reading

The Economic Cycle Research Institute (ECRI), has had an impressive track record in forecasting recessions and recoveries.  The last several weeks, one of their leading indicators, the Weekly Leading Indicator (WLI) entered negative territory in its growth rate, and that rate stands at -10.7%.  Some analysts are claiming that when the WLI growth rate is at -10 or below, there is a 100% probability of recession.

In this article on Barry Ritholtz’s The Big Picture, the co-founders of ECRI, Lakshman Achuthan and Anirvan Banerji discuss in great detail how both bulls and bears are misrepresenting their data.  The WLI is just one of many leading indicators, and it can’t be used by itself to forecast a recession.

The ECRI is not forecasting a recession at this point.

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