Contact

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.

Learn more

Our Track Record

ECRI Services

Highlights of ECRI's calls.

View the Timeline

ECRI Services

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

Learn More

Testimonial

In March [2009], the month the market scraped bottom, ECRI went forth with [a] tablepounding historical observation-. The implication could not have been clearer that a market rally, when it started, would be no sucker's affair but the real McCoy.
- Grant's Interest Rate Observer
I have to pay attention to those people and indicators that have pointed in the right direction - even when they've gone against the crowd (and my opinion at the time). One such outfit is the Economic Cycle Research Institute, whose various leading indicators actually have done just that - lead where things were headed.
- Randall Forsyth, Barron's
(ECRI's) forecast of the [Great] recession helped us anticipate reduced merchandise sales; we proactively revised our inventory forecasts down months ago, and that has helped to greatly minimize the inventory swell and need for markdowns.
- Fortune 100 Company
Congrats on having the only coherent analysis available.
- ECRI Client
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. Jan. 2005
- The Economist
ECRI continues to be an important resource in determining our tactical allocation. For over a decade their economic cycle forecasts and detailed research topics have been a critical part of our decision making process.
- ECRI Client