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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.

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2018 Cycle Calls


 

In 2018 the U.S. entered the fourth growth rate cycle (GRC) downturn since 2010, which was critical to understand since every GRC downturn since has seen at least one correction of 10% or more.

Highlights of ECRI 2018 cycle calls follow below, or download our recent track record PDF. To enquire about risk management services, set up a call or meeting.


The Fall of 2018 Saw Markets Pricing in Cycle Downturns Called Earlier by ECRI


Slowing Growth Stoking Financial Stress
“The danger of more market volatility remains, regardless of hopes for seasonal strength. This is because upswings and downswings in financial market risks are related to cycles in economic growth, which our leading indexes anticipate.” – Client report, November 2018

Global Industrial Slowdown to Worsen
“The global industrial slowdown we first forecast a year ago is in full swing and set to worsen. Meanwhile, with purchasing managers indexes actually lagging last November’s peak in global industrial production growth, the consensus was caught behind the curve.” – Client report, October 2018

 

Global Slowdown Set to Spread
“The major central banks are poised to tighten monetary policy in the face of the global slowdown.” – Client report, September 2018

Chinese Dragon Under Threat
“In the midst of the trade war, China’s economy is starting to look more fragile on a cyclical basis. This is the message from our leading indexes, which help cut through the noise currently generated by geopolitical tensions.” – Client report, September 2018

 

The Summer of 2018 Saw Markets Miss the Inflation Cycle Downturn

U.S. Inflation to Surprise to the Downside
“Contrary to consensus expectations, there is rising risk of a downturn in inflation, according to ECRI’s U.S. Future Inflation Gauge.” – Client report, August 2018

 

U.S. Home Price Growth Set to Fall Further
“[W]ith (U.S. Leading Home Price Index) growth plunging to a 9¼-year low, real home price growth is set to fall further.” – Client report, July 2018

 

Chinese Export Outlook Darkens
“Chinese export growth was set to fall well before trade tensions mounted. That is the clear message from ECRI’s Chinese Leading Exports Index, which also gauges the cyclical susceptibility of China’s exports to negative shocks, like tariffs, that could intensify the slump.” – Client report, July 2018

 

Clouds Gather over Eurozone Horizon
“A combination of falling economic growth and rising inflation poses a challenge for ECB policymakers.” – Client report, July 2018

 

Pullback in U.S. Future Inflation Gauge
“ECRI’s U.S. Future Inflation Gauge ... has backed off a bit since February. While this pullback remains modest, it bears watching for early signs of a fresh cyclical downturn in underlying inflation pressures, which would truly baffle Phillips curve devotees.” – Client report, June 2018

 

In The Spring We Ratcheted up the Alarm on EM

Rising Cyclical Risks for Emerging Markets
“ECRI’s indexes reveal a growing confluence of cyclical risks for emerging market economies.” – Client report, June 2018

 

Global Growth Downturn to Widen
“The global growth outlook has dimmed further, undermining hopes that the recent weakness in growth will be transitory. This is the message from ECRI’s international leading indexes, which capture cross-country cyclical contagion.”  – Client report, May 2018

Global Industrial Outlook Weakens
“Spiking commodity prices have misled the markets into optimism about the global industrial growth outlook. In fact, those prospects have already dimmed, according to ECRI’s leading indexes, which are designed to discern cyclical signals from noise.” – Client report, April 2018

 

As 2018 Began We Knew that a Cyclical Downturn in Global Growth was Happening, Pre-Tariffs

Chinese Industrial Growth Prospects Dim (pre-sanctions)
“Today, our Chinese Leading Industrial Production Index is pointing to a deepening industrial slowdown, accompanied by intensifying disinflationary pressures in the Chinese industrial sector.” – Client report, March 2018

 

 

Global Growth Prospects Fade
“The point is that global growth has started to slow.” – Client report, February 2018

 

Cyclical Concerns Cloud India’s Structural Promise
“ECRI’s leading indexes show reduced room for policy maneuver, with growth prospects dimming as inflation pressures simmer.” – Client report, February 2018

 

Global Export Growth Slowing
“At this stage of the global growth upturn … some pundits would mistake it for a structural shift away from low trend growth and lowflation. But the cyclical avalanche whose rumblings we now hear can be even more damaging when a complacent consensus disregards them.” – Client report, January 2018

 

Long Leading Indexes Lead Purchasing Managers Indexes
ECRI’s long leading indexes have statistically significant leads over composite PMIs for the G7 economies and China. [Looking at a] recent case in point … [t]he IHS Markit composite PMI [has] dropped to a nine-month low; the ISM composite PMI … to a three-month low. With USLLI growth being a leading indicator of both PMI measures, these … are likely to amount to cyclical downturns that are not obvious to those who are unaware of the USLLI’s behavior. This is one way to gain an advantage over the consensus at cycle turns, which are typically recognized only well after the fact. For investment managers and corporate decision makers alike, that can make all the difference when dealing with the competition.” – Client report, January 2018

Download our recent track record here in PDF.

For more information on ECRI professional services please contact us.

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