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Economy in Brief

ECRI U.S. Leading Index Down
by Tom Moeller September 20, 2004

Since May, the Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) has declined in all but a handful of weeks. Its smoothed six-month growth rate has now fallen into negative territory for the first time since early 2003.

The growth rate's initial move into negative territory in 2002 foreshadowed a slowdown in quarterly real GDP growth to 0.7% by yearend from 3.4% early in the year.

Recent declines in the leading index reflects broad weakness amongst the components. 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.

During the last ten years there has been a 69% correlation between the six-month growth in the ECRI leading index of the US economy and 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. There has been a 70% correlation between the y/y percent change in the two series over the last 10 years.

The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months.

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

ECRI Leading Index 09/10/04 09/03/04 Growth Rate 2003 2002 2001
Weekly 131.7 132.5 -0.2% 6.5% 1.1% -5.3%
  Aug July        
Monthly 130.8 131.0 -0.2%      
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