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Rumble From Richmond

There was a rumble from Richmond, which extended north to New York. Not the earthquake that got the media attention Tuesday, but the worse-than-expected report from the Federal Reserve Bank of Richmond, which corroborated previous downbeat reports from its counterparts in New York and Philadelphia...

Lost in the debate over the Fed district data has been the decline in one of the most reliable indicators of the economy's direction, the weekly leading index from the Economic Cycle Research Institute. The ECRI Weekly Leading Index gave early warnings of the economic downturn and also the recovery.

More recently, the ECRI Weekly Leading Index peaked in early May -- right around the same time as the Standard & Poor's 500 Index -- and fell gradually into July before stabilizing. In the latest week, the ECRI gauge fell sharply, also coincident with the S&P's tumble.

Taken all together, these declines in the various Fed district indexes, along with the drop in the ECRI gauge, tell a consistent story of a sharp weakening in the U.S. economy in the current quarter. And that story coincides with the action of the markets, with equities and risk assets hitting the skids and a flight to safety in U.S. Treasuries despite their downgrade by S&P from triple-A...