SHARE
The WLI Tug-of-War
The plunge in stock prices from early spring to the middle of summer has clearly hurt not only U.S. investor confidence, but also business confidence, and raised fears of a new recession.
Yet ECRI's Weekly Leading Index (WLI), which is already available through mid-August, is not yet pointing to that double dip because its movements balance out different forces influencing the economic cycle.
As the real-economy-related components of the WLI have actually been rising strongly this year. In contrast, the market-perception-related components have been plunging, while the policy related variables have been trending gently upward.
The upshot has been that the index has dipped a bit in recent weeks, but not dramatically so. In fact, it rose in the week ended August 16, and is a full point above the recent low seen three weeks earlier. With the index starting to stabilize instead of falling further, a double-dip recession remains unlikely this year.
Yet ECRI's Weekly Leading Index (WLI), which is already available through mid-August, is not yet pointing to that double dip because its movements balance out different forces influencing the economic cycle.
As the real-economy-related components of the WLI have actually been rising strongly this year. In contrast, the market-perception-related components have been plunging, while the policy related variables have been trending gently upward.
The upshot has been that the index has dipped a bit in recent weeks, but not dramatically so. In fact, it rose in the week ended August 16, and is a full point above the recent low seen three weeks earlier. With the index starting to stabilize instead of falling further, a double-dip recession remains unlikely this year.
VIEW THIS ARTICLE ON ECRI