Lakshman Achuthan, the head of the Economic Cycle Research Institute (ECRI), was on Bloomberg this morning to defend his call that we are currently in recession. The interview was very brief and he wasn’t able to address all of the criticisms out there.
Thankfully, Achuthan has a new post on ECRI’s website that’s a bit more extensive.
One criticism he addresses is the signal that is being sent by ECRI’s own Weekly Leading Index (WLI). Doug Short of Advisor Perspectives often points to this as contradicting Achuthan’s call.
“The WLI growth indicator (WLIg) is in its second week in expansion territory at 1.0 (up from last week’s 0.5),” wrote Short last Friday. “It has now posted 10 consecutive weeks of improvement.”
Short characterises Achuthan’s call an “embarrassment.”
Here’s Achuthan’s response to those pointing to WLI:
Some believe that our own Weekly Leading Index contradicts our U.S. recession call. This is not the first time that charge has been made. Recall that, a couple of years ago, people said that its movements guaranteed a double-dip recession. At the time we flatly and correctly rejected that interpretation. Today we can tell you that the Weekly Leading Index is not pointing to recovery and, more importantly, this is also the message from our full array of leading indexes.
It’s not the most satisfying response. But the bottom line is that ECRI’s WLI is up for interpretation.
Unfortunately, only Achuthan seems to understand what the WLI is saying.
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