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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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Cyclical Outlook Diverges from Headlines


The tone of Davos meetings captures the mood of global movers and shakers. Virtually everyone there is so optimistic about economic growth that the economy doesn't even make the list of their top five concerns.

In sharp contrast, ECRI’s long leading indexes point to slowing global growth in 2018, and these are the same leading indexes that nailed the global growth upturn we discussed last year.
 
Yes, the synchronized global growth we’ve seen in 2017 has been great, but net-net U.S. is now sucking in other countries' goods exports more than ever before, weighing on U.S. GDP growth.

China is not immune to the 2018 global slowdown, and growth in our Chinese Leading Industrial Production Index has fallen to a 29-month low, so Chinese industrial growth is coming down.

In the U.S., despite lift from tax cuts, our leading indexes also see growth slowing, and please recall that a cyclical slowdown typically reduces GDP growth by a couple percentage points. Estimates of the tax cut boost to GDP are a fraction of one percent, so at best the tax cuts can soften the slowdown.

The bottom line: ECRI's cyclical indexes suggest that most people are looking the wrong way on economic growth.

Related News & Events

Bond quality spread confirming looming economic slowdown

CNBC February 13, 2018

ECRI sees 2018 economic slowdown on tap, and bond market quality spreads agree. More

 

Up is Down: Jump in AHE Growth Confirms Economic Slowdown

ECRI February 2, 2018

January wage growth jumped for an unwelcome reason: growth in hours fell faster than pay growth. More

 

Trump's Tax Cuts Won't Offset the Impending Slowdown

Bloomberg January 25, 2018

Everyone's too optimistic about 2018. More

 

Jobs Report and 2018 Slowdown

Reuters January 5, 2018

Reuters interview discussing the Dec. jobs report, as well as ECRI's view on cycles in economic growth, including a U.S. slowdown in 2018. More

 

Tell-Tale Spreads Confirm Slowdown Ahead

Bloomberg December 13, 2017

The bond market, like ECRI's leading indexes, sees an impending slowdown. More

 

27th Annual Minsky Conference

Levy Economics Institute April 17, 2018

On April 17, Lakshman Achuthan will present at the Levy Institute's 27th Annual Minsky Conference.