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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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Apr 21 2015

Economy Confuses the Consensus

In late December, on the heels of a strong GDP report for Q3 2014, ECRI explained that it was premature to be overly optimistic, because we had seen similar readings before since the Great Recession, only to fall back to weaker growth. Just one month later, we highlighted in a report to our clients how ECRI’s outlook for U.S. economic growth had diverged from that of the consensus: ”Our analysis shows that economic growth will get worse in the coming months. In contrast, the consensus view on the economy is that things will get even better.”

Sure enough, coincident measures of the economy such as employment and industrial production have disappointed in recent months, vindicating our earlier prediction. Now, with economic surprise indexes falling to their most negative readings in years, the consensus has started to panic so much that even the “R” word is making a comeback. In this context, ECRI’s array of Leading Indexes for the U.S., designed to anticipate cyclical turning points in the overall economy and its sectors, including employment, already provide unambiguous insights regarding U.S. economic growth prospects.

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