The leading index of the US economy published weekly by the Economic Cycle Research Institute (ECRI) fell during four of the last five weeks. The latest 0.4% w/w decline reflected, in part, the sharp rise in initial claims for unemployment insurance due to Hurricane Katrina.

These weekly declines, however, are modest compared to past periods when economic recession was indicated. The six month growth rate of the leading index has held at roughly 3%, still up from the June low of -0.6% and from the -5% to -7% growth rates which preceded the last recession.

During the last ten years there has been a 53% correlation between the change in the weekly leading index and US real GDP growth during the following quarter. The correlation has risen to 76% during the last five years.

ECRI's research director indicated that "The economy was at a phase of the business cycle where it was relatively resilient to any type of shock. The reality is that the potency of a shock, how much influence it can have, really depends on where we are in the business cycle."

The accompanying charts indicate some of that resiliency. Recent US economic growth has been less due to consumer spending & housing and more due to exports & business fixed investment. Moreover, core price inflation recently has been low and declining rather than high and rising.

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