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The ECRI Approach

The Forecasting Challenge

Many believe that recessions are hard to predict, and for good reason. As an IMF study of economist forecasts from 63 countries concluded, their “record of failure to predict recessions is virtually unblemished.”

But it is wrong to think that predicting recessions is impossible: as The Economist magazine noted in 2005, “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.”

Forecasting turning points in economic growth and inflation is exactly what ECRI does.

Most forecasters use models that reduce a complex economy to a rigid set of largely backward-looking relationships. Simply put, they try to predict the near future based on what has happened in the recent past. This can work for a while – until the critical moment when a turning point approaches, and such models reliably fail. This is because extrapolating from the recent past is a sure-fire recipe for being surprised by the next turn.

Our Advantage: Strong Foundation, Ongoing Advances

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 builds on the work of ECRI's co-founder, Geoffrey H. Moore, and his mentors, Wesley C. Mitchell and Arthur F. Burns.

Our track record reflects the major strides we have made since our array of leading indexes reached critical mass, allowing us to systematically monitor the lions’ share of global cycles.

  • A comprehensive framework of leading indexes for key aspects of each economy.
  • Broad international coverage of over 22 economies, including the first-ever leading indicator systems for China, India, Brazil and Russia.
  • Monitoring global cyclical contagion.
ECRI's forecasting framework is the state of the art.

Our indicator systems are designed to predict the timing of future changes in the economy's direction. They signal those turns before the fact, and well before the consensus. ECRI's focus is on identifying when those changes in direction will occur (see chart).

Leading Indexes can Time Turns

According to the mainstream view, recessions are caused by shocks propagating through the economy. In contrast, our framework, based on many decades of research, finds that endogenous cyclical forces periodically open up windows of cyclical vulnerability that make it much easier for exogenous shocks to precipitate recessions. In the absence of cyclical weakness, such shocks are not recessionary. Because our leading indexes monitor when the economy becomes susceptible to shocks, they effectively anticipate recessions.

About Business Cycles

Monitoring Business Cycles Today

See the state of the art.

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Our Track Record

ECRI Services

Highlights of ECRI's calls.

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ECRI Services

The clarity and conviction to break from the crowd at the right time.

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Testimonial

In the opinion littered world of economic forecasting, ECRI is Mr. Spock - deeply analytical, dispassionate, and accurate.
- ECRI Client
ECRI [is] the most accurate forecasting institution in the world.
- Sydney Morning Herald
ECRI can justify a certain smugness now that business cycles are back in fashion. The institute called the last two recessions and the current recovery months ahead of the pack.
- Harvard Business Review
"penetrating analysis"
- The New York Times
"eerily accurate"
- National Public Radio
I find that ECRI's historical knowledge of economic cycles and data is almost as important to me as your indicators of future cycles.
- ECRI Client