The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) moved higher through early March. The move was accompanied by an uptick in ECRI's Future Inflation Gauge but that followed a 7.1% decline from March '03 to December '03.

The Weekly Leading Index level stretched to a record high and the six-month growth rate of 11.1% is consistent with above-trend growth in real GDP.

The Future Inflation Gauge (FIG) rose 2.6% during January and February. However, since these increases followed sharp declines through most of last year the FIG's six month growth rate remained low at -2.1% versus the highs above 20% a year ago. The monthly FIG has a mean lead of 11 months and a median lead of 9 months at inflation cycle turns.

During the last ten years there has been a 68% correlation between the six-month growth in the leading index of the US economy and the two quarter growth in real GDP.

Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been a 75% correlation between the y/y percent change in the two series over the last 20 years.

The components of the ECRI weekly leading index are money supply plus stock & bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.

The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy's growth rate.

For more on ECRI and the Weekly Leading Index go to this link.