Friday, November 30, 2012
ECRI concedes it was wrong
- by New Deal democrat
Yesterday Lakshman Achuthan made the rounds of business television shows to once again announce their 14+ month old recession call. This time he came armed with a graph of 4 coincident series, arguing that the expansion peaked in July (see video link below to view graph).
Indeed as of this morning, 3 of the 4 coincident indicators normally used to mark the onsets of recessions and recoveries are off their peaks (industrial production, real retail sales, and real income ex transfer receipts). Employment of course is still positive. As an aside, ECRI uses real manufacturing and trade sales, for which we have data through September, and at that time those sales were only -0.1% off their April 2012 peak).
It is possible that if the slide in the data continues, the NBER could ultimately decide that presently we are in a recession, probably with a start date of August 2012. Such a slide, however, has a lot to do with things that aren't (and really couldn't be) in Leading Indicators - tension in the Gulf of Hormuz sending gas prices soaring in late summer, the fiscal cliff, and most of all Hurricane Sandy. That might be enough to tip the "inching higher" Conference Board LEI into an "inching lower" economy.
But here's the problem:
1. ECRI's first announcement, in September 2011, was that we were already IN a recession, or one was imminent, with a start date in Q3 or A4 of 2011. Here's the video:
2. In December, they revised it to a recession "by midyear" 2012, but most likely begining in Q1 2012.
3. On July 10, Achuthan gave an interview to Bloomberg TV in which he said a recession had already started. Here's the link:
Between the 0:50 mark and the 1:12 mark, Achuthan specifically admits to the call in paragraph 2 above, and specifically states that as of the date of his interview, a recession has already begun.
So with the current "announcement" that the peak of activity was in July, presumably meaning a recession started in August, ECRI is factually conceding without saying so, that it's first three forecasts were wrong.
Not that they'll ever admit to that.
Are we in a recession now? The November data is probably going to be bad, mainly due to Sandy. We won't get the December data until January. Once we see if we get a rebound from Sandy, and if so how much, we'll be in a better position to tell. In the meantime, my best information is that the economy is "shambling along."
P.S. I'll have the Weekly Indicators up at some point this weekend, but I won't swear as to which day and what time.