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.



Upturn Ahead?

File under Good News That Could Turn Bad: An index developed decades ago by the independent Economic Cycle Research Institute suggests the economy may recover before year end.

The growth rate of the Weekly Leading Index—composed of forward-looking indicators for sales, jobs, income, and output—has improved by a third from its Dec. 5, 2008, low of roughly -30%. While the rate is still negative, says Lakshman Achuthan, the institute's managing director, the uptick "has us forecasting an economic upturn."

In 16 of the last 17 U.S. downturns, a climb like this one was followed by recovery in about four months, Achuthan says. The exception: In 1930, after months of climbing, a similar index used by the institute went south, and so did the economy—into the Great Depression.