Glossary

Content-related questions:

Q. Can you tell me more about each index presented on the Recession Recovery Watch page?

U.S. Weekly Leading Index

This high-frequency leading index of U.S. economic growth is available very promptly. The Weekly Leading Index (WLI) directly addresses concerns about the freshness of data that forecasters have with existing leading indicators, including the well-known monthly Index of Leading Economic Indicators (LEI), originally developed by ECRI's founder, Geoffrey H. Moore, for the U.S. Commerce Department.

The WLI resolves these issues by being available promptly and frequently. Specifically, each Friday the WLI is updated with data through the previous week. This is extremely prompt and represents a significant leap forward in the monitoring of economic conditions. In contrast, the LEI is far less prompt. Moore, who developed the original LEI in the 1960s, also oversaw the development of the WLI, which represents the latest in a long series of advances made since the introduction of the original LEI. Key improvements include:

Frequency - the WLI is available every week, rather than monthly, allowing for closer monitoring of the U.S. economic cycle.

Promptness - the WLI is extremely prompt. Each Friday the WLI is updated through the previous Friday, i.e., there is only a one-week publication lag.

New composite index method - an improved method of composite index construction is used (Geoffrey Moore and Julius Shiskin developed the original LEI method). The result is a more clearly cyclical index with increased sensitivity at economic cycle turning points.

Revisions - only one component (money supply) out of seven is subject to significant revision.

Leads - the WLI has an average lead of 10 months at business cycle peaks and three months at business cycle troughs, which amounts to a longer overall lead than the LEI. Given its prompt availability, the WLI has an even longer effective lead at business cycle turning points, and would have historically signaled a typical recession about three months ahead of the LEI. In fact, the WLI has a longer effective lead than the LEI at 83% of business cycle peaks and 60% of business cycle troughs.

U.S. Leading Home Price Index

U.S. Leading Home Price Index (USLHPI) is designed to lead cyclical swings in real (i.e., inflation-adjusted) median home prices. It is a summary measure of the best leading indicators of U.S. home prices.

Frequency - monthly

Leads - Cyclical turning points in the USLHPI lead the peaks and troughs in the real home prices with an average lead of ten months.

Release Date - Fourth week of following month, e.g., January data is available in the fourth week of February.

U.S. Future Inflation Gauge

Our group of researchers, led by Geoffrey H. Moore, pioneered the creation of leading inflation indexes. This work began two decades ago in the wake of the 1970s stagflation when weak growth was accompanied by high inflation, demonstrating that cycles in growth and inflation, while related, were distinct. In the late 1990s growth and inflation again de-linked with strong growth now accompanied by subdued inflation.

Frequency – Monthly (a promptly available weekly version is available exclusively to ECRI Professional subscribers)

Leads - The USFIG has a mean lead of 11 months and a median lead of 9 months at inflation cycle turns.

Release Date - First week of following month, e.g., January data is available in the first week of February.

ECRI's U.S. Coincident Index (USCI)

The U.S. Coincident Index is designed to track the current state of the U.S. economy. It is a comprehensive summary measure of U.S. economic conditions made up of coincident indicators of the U.S. economy including measures of production, employment, income and sales.

Cyclical turning points in the USCI generally match the peaks and troughs in the U.S. business cycle, while cyclical turning points in the smoothed growth rate of the USCI help determine the U.S. growth rate cycle chronology.

Frequency - Monthly

Leads - The USCI has a mean lead of 0 months and a median lead of 0 months at business cycle turns.

Release Date - Third week of following month, e.g., January data is available in the third week of February.

Q. Does a reading of "0" for the WLI growth rate mean a forecast of zero economic growth or a forecast of no change in the economic growth rate?

A. There is no strict meaning for each value of the growth rate of the WLI or any other leading index. What is important is whether the move is significant according to the "3 Ps" criteria (i.e. how pronounced, persistent and pervasive is the rise/fall compared to past cyclical moves), as outlined in Beating the Business Cycle.

Q. I would like to see Future Inflation Gauges for countries other than U.S. How can I get this information?

A. FIG data for nine different countries are available to our professional members.

Q. I would like to know the weighting ratio for the JoC-ECRI Industrial Price Index. How can I obtain this information?

A. Information on the weightings of all of our indexes, including the JOC-ECRI index is proprietary and not publicly available.

Q. What’s the difference between business cycles, growth rate cycles and inflation cycles?

A. 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, they exhibit growth rate cycles, which are 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. Also, there have been periods of "stagflation" when high inflation co-exists with weak growth, as in the late 1970s, and robust growth with low inflation, as in the late 1990s. In other words, cycles in economic growth are distinct in timing from cycles in inflation. That is why ECRI monitors inflation cycles separately from business cycles or growth rate cycles.