The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) fell last week for the fifth week in the last six. The 0.6% decline lowered the index 2.9% versus the peak in early March.

During the last ten years there has been a 54% correlation between the change in the weekly leading index and the change in US real GDP growth during the following quarter. The correlation has risen to 67% during the last five years. During the last ten years there has been a a 70% correlation between the y/y change in the ECRI leaders and the change in the Conference Board's Index of Leading Economic Indicators.

Six month in the leaders fell to near zero. While down sharply from the double digit growth rates logged during 2003, recession is not indicated. Negative growth in excess of -4% typically preceded past U.S. recessions.

A slowdown in economic growth may or may not be indicated by the more than 10 percentage point slowdown in the leaders' growth. During both the late 1980s and the late 1990s, the leaders slowed by an even greater degree and little slowing in real GDP occurred.

Weakness in the leaders has been broad based. The components of the Conference Board leaders weigh heavily on the financial and the factory sectors (which are the more volatile of the US data series) and both sets are indicating slower growth.

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