A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

ECRI uses a highly nuanced “many-cycles” view to understand the complex dynamics of the global economy.
To monitor the U.S. economy alone, we use an array of more than a dozen specialized leading indexes in the context of the ECRI framework for incorporating various sectors and aspects of the economy.
The ECRI framework covers 21 economies, incorporating well over 100 proprietary indexes designed to be comparable across borders.

FAQs

How does ECRI forecast turning points in the economy?

A century-long tradition of business cycle research gives ECRI a singular perspective on the ebb and flow of the economy, even in the face of unexpected shocks. Our approach is informed by the fundamental drivers of economic cycles. It is an approach pioneered by ECRI's co-founder, Geoffrey H. Moore, and his mentors, Wesley C. Mitchell and Arthur F. Burns.

In 1950, Moore built on his mentors' findings to develop the first leading indicators of both revival and recession. In the 1960s he developed the original index of leading economic indicators (LEI). It is a testament to the quality of that breakthrough that, nearly half a century later, many still believe the LEI and its variants to be the best tools for cycle forecasting.

However, building on that foundation, by the late 1990s ECRI had put together a far more sophisticated framework for analyzing international economic cycles that remains at the cutting edge of business cycle research and forecasting.

Learn more about monitoring business cycles today.

Read excerpts from Beating the Business Cycle, by ECRI's co-founders.

What is the difference between business cycles, growth rate cycles, and inflation cycles?

Business cycles consist of the alternating periods of expansion and contraction in the level of economic activity experienced by market-oriented economies.

Even during periods when such economies do not exhibit business cycle contractions, an economy will exhibit growth rate cycles – alternating periods of upswings and downswings in the economy’s rate of growth.

Inflation cycles consist of alternating periods of rising and falling inflation. Inflation cycle downturns have a degree of correspondence with economic slowdowns, but sometimes begin before, rather than after, the start of a slowdown.

What is a composite index?

A composite index allows a wide range of data to be summarized without using an econometric model.

What is the difference between the leading, coincident, and lagging indexes?

An essential component of our understanding is our ability to identify leading, coincident, and lagging indicators of the business cycle. As a result, we are not distracted by 99% of the economic data that does not fall into any of these categories, i.e., they are simply misleading indicators when it comes to cyclical turns in growth, inflation, and employment.

• Leading indicators consistently turn before the economy does.

• Coincident indicators turn in step with the economy and track the business cycle’s progress.

• Lagging indicators turn after the economy turns, and play a confirmatory role.

What are the components of ECRI's leading indexes?

The components of ECRI's composite indexes are proprietary.

More importantly, our ability to forecast turning points is not predicated on some "special" ingredient that we use. Rather, it's the co-movement of our indicators that is most revealing. This is to say that, when thinking about our approach, focusing on components that we may use actually misses the forest for the trees.

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Testimonial

As an investment strategist, I need to navigate the many twists and turns in the emerging economic landscape with as much foresight as possible to know when to take or avoid risk. In this quest, ECRI's array of leading indices, specifically designed to predict and navigate economic turning points, have been an indispensible tool.

- ECRI Professional Member

This approach works like a charm.

- Forbes Magazine

[T]he Economic Cycle Research Institute [is] a private forecasting group with an excellent track record.

- The New York Times

Nothing in the world compares with ECRI's insights into the business cycle. Those insights form a key part of our strategic and tactical management of asset class allocations. We have never been disappointed in following what ECRI's indicators suggest is likely to occur next.

- ECRI Professional Member

I have to pay attention to those people and indicators that have pointed in the right direction â€“ even when they've gone against the crowd (and my opinion at the time). One such outfit is the Economic Cycle Research Institute, whose various leading indicators actually have done just that â€“ lead where things were headed.

- Randall Forsyth, Barron's

ECRI is perhaps the only organisation to give advance warning of each of the past three recessions; just as impressive, it has never issued a false alarm. Jan. 2005

- The Economist