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.



Weekly Leading Index Falls

The fate of the U.S. economy depends on a quick resolution of the U.S.-led war in Iraq, according to a weekly report on the U.S. economy released on Friday which fell to a 10-week low in the week ended March 14.

The Economic Cycle Research Institute said its weekly leading index fell due to worries about war and at a time when the economy is increasingly vulnerable to an external shock such as a terrorist attack or a spike in oil prices.

ECRI linked the possibility of a future recession to how long war in Iraq will last. "If it is quicker and more decisive, we have a chance at tipping away from a recession," ECRI Managing Director Lakshman Achuthan said.

"The window of vulnerability is open, and any shock can be debilitating," Achuthan said. Oil prices that persist at $40 a barrel for two months can qualify as a negative shock, he said. A terrorist attack occurring now would also have the potential to cause a recession, while the same attack during a stronger economy would not, he said.

The index's growth rate, which smoothes out weekly fluctuations, fell in the week ended March 14, to -2.2 percent from -1.9 percent.

The Weekly Leading Index is composed of a balance of several major economic indicators. ECRI designs short- and long-term indexes aimed at predicting business cycles, recessions and recoveries in the world's leading economies.