The ECRI Is Rising Again And Bears Are No Longer Interested In It

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 ECRI’s previous decline put the index in ‘certain recession territory’ according to some observers. David Rosenberg said it had forecast an 80% chance of a GDP contraction.

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:

Pragmatic Capitalism:

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.

Chart

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.’

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