March 17, 2012, ECRI Stands By Recession Call - Bob Brinker Waiting for Apology

March 17, 2012....Last Thursday, Economic Cycle Research Institute (ECRI), posted their public commentary stating that their recession call still stands because their indicators "give them no choice."

Bob Brinker disagrees with Lakshman Acuthan and has been very vocal about saying so on Moneytalk. Bob even blames recession predictions for scaring investors out of the market. 

Shortly after ECRI's CEO, Lakshman Achuthan, made the recession prediction, Bob said this on Moneytalk:   "You know, we have these private forecasters out there going around beating the drums of recession. Warning everybody that the US is going back into recession. Batten down the hatches and get in the bomb shelter because we are in a lot of economic trouble. That is what they say, but that's not what we see. So far, we see an economy that continues to grow slowly.......

....One of things that amazes me about the private firms that are forecasting a  recession in here is their conviction. I mean they talk about it like it's a fait accompli. They talk about it like it's for sure -- take it to the bank. Well I'm not taking it to the bank. What do you think about that? I think these forecasters are wrong, but I'll look forward to their apology....this is Moneytalk." 

In Marketimer Bob almost always reports data about the Conference Board Index of Leading Economic Indicators (LEI) and the Coincident Economic Index (CEI). Bob's conclusions are different from Lakshman Achuthan's. 

 In the March issue of Marketimer, Bob wrote: "Taking these two indexes together, we conclude that the current economic expansion remains intact. We continue to expect real gross domestic product (GDP) growth in 2012 within a range of 1.5% to 2.5%, which is slightly more conservative than the Federal Reserve forecast." 

 On the other hand, here are excepts from ECRI's latest  public report. Businesscycle: Why our Recession Call Stands : 

 "Let’s start with the current state of the economy. A couple of weeks ago, we publicly highlighted ECRI’s U.S. Coincident Index (USCI). It’s important to understand that the USCI isn’t a random concoction of data, but rather the gold standard for measuring current economic growth, as it summarizes the key coincident economic indicators used to determine the official start and end dates of U.S. recessions; namely, the broad measures of output, employment, income and sales. So when USCI growth is in a downturn (bottom line in chart), it’s an authoritative indication that overall U.S. economic growth is actually worsening, not reviving.

In contrast to the 3% GDP growth widely reported for the latest quarter, year-over-year growth in GDP, after peaking at 3½% in Q3/2010, has basically flatlined around 1½% for the last three quarters. Broad sales growth has followed a similar pattern, while the growth rates of personal income and industrial production have dropped to their lowest readings since the spring of 2010.

The exception to this weakening pattern is year-over-year payroll job growth, which continued to improve through January, and was essentially flat in February. However, the empirical record shows that job growth typically turns down after downturns in consumer spending growth, not the other way around. Because consumer spending growth remains in a cyclical downturn, we expect job growth to start flagging in the coming months.  But the point remains that the USCI, which summarizes the definitive coincident economic indicators – including jobs – indicates declining growth in the U.S. economy.

 (SNIP)

In the chart, please note the one-to-one correspondence between the cyclical swings in the year-over-year growth rates of the WLI and USCI since the Great Recession. Both surged initially, only to roll over, pop up briefly, and then turn down once again. It is notable that the WLI, which is sensitive to the prices of risk assets that have been supported by massive worldwide liquidity injections, has hardly been swayed from its recessionary trajectory. In spite of the efforts of monetary policy makers, actual U.S. economic growth has slowed, while WLI growth has barely budged from a two-and-a-half-year low.
 
The bigger question is, can unprecedented, concerted global monetary policy action repeal the business cycle? The objective coincident and leading indexes that we have always monitored are still telling us that it cannot."

Some humor: 

 birdbrain said...

"In this corner wearing blue and gold trunks, co-founder of ECRI, predictor of an upcoming recession and who has the courage to appear with Suzanne Pratt on Nightly Business Report, Lakshman Achuthan.

And in this corner wearing in-the-red trunks, publisher of Marketholder, looking for a comeback after being defeated by both Cassandra and Bad News Bear in 2008 and terribly pummeled by Nevada Property, from Lake Las Vegas, Bob Brinker."

Pay per view, anyone?

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