Just as the Baltic Dry Index only seems interesting to bearish market observers when it is falling, the ECRI now seems stuck in a similar predicament.
The actual creators of the ECRI were forced to even publicly counter these kinds of affirmations, saying that its decline was not an indicator of a new recession, but that didn’t stop its continued use as a double-dip indicator.
Now the ECRI is rebounding:
The ECRI’s Leading Index of economic growth hit a two week high at 122.5, but remains at a level that is consistent with sluggish growth according to the Institute. The index’s annualized growth rate rose to -7.8% from -8.7% last week. This is a dramatic improvement from the recent lows.
The ECRI’s behaviour over the last few months is fitting the thesis that we just experienced a mid-year slow-down, not the beginning of a double-dip GDP recession… also known as ‘what the guys who built the indicator had said.’