Our ability to predict turning points has advanced considerably since the original index of leading economic indicators (LEI) was created by ECRI co-founder Geoffrey H. Moore and adopted by the U.S. government in the 1960s. Building on that foundation, by the mid-1990s ECRI had developed a far more sophisticated framework for analyzing international economic cycles at the cutting edge of business cycle research and forecasting. Today, ECRI uses this highly nuanced “many-cycles” view to monitor the complex dynamics of the global economy.
An objective, comprehensive framework for monitoring economic cycles
A Framework That Provides Clarity
During periods of so-called “low visibility,” confusion reigns: for every indication of one trend, there seems to be evidence of 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. But a single composite index is not enough.
- To monitor the U.S. economy alone, we use an array of more than a dozen specialized leading indexes in the context of the ECRI framework for incorporating various sectors and aspects of the economy.
- The ECRI framework covers 21 economies, incorporating indexes designed to be comparable across borders. Collectively, these add up to well over 100 proprietary indexes.
Objective Analysis, Durable Sequences
The durable sequences linking the indicators we monitor allow us to make sense of the consistent patterns at cyclical turning points. They let us objectively sort through data about the economy, while filtering out the “noise.” Unlike econometric models, ECRI's indexes are not based on data-fitting, and do not need to be tweaked or adjusted to account for new data or events.
The cyclical sequences within our overarching framework endure, regardless of the drama or confusion of a particular moment.