Thursday, January 17, 2013

ECRI's "tell-tale chart" now telling a different tale

- by New Deal democrat

A little over a month ago, ECRI - who started forecasting an "imminent" recession a year and four months ago, saying it may even have already started in August or September 2011 - premiered what they called their tell-tale chart, opining:
Reviewing the indicators used to officially decide U.S. recession dates, it looks like the recession began around July 2012. This is because, in retrospect, three of those four coincident indicators – the broad measures of production, income, employment and sales – saw their high points in July (vertical red line in chart), with only employment still rising.
Here's the chart:

With yesterday's reports of industrial production and real retail sales, however, the chart is now telling a different tale (all series have been set to 100 for July 2012):

As you can see, between November and December all four coincident indicators - industrial production, real retail sales, real income ex transfer payments, and payrolls - have all made new highs.

While we don't have the inflation adjustment for real manufacturing and trade sales, the series used by ECRI instead of real retail sales, that series doesn't help their case any more either. Manufacturing and trade sales for November were reported Tuesday at 1,271.6, up 2% from their previous post-recession high of 1,247.7 set in March. Unless there is a huge mysterious spike of inflation in November reported by the BEA later this month in the incomes and spending report, real manufacturing and trade sales will also set a new high.

For a year now ECRI has stopped discussing either their long or short leading indicators in public. When they make the rounds of CNN, CNBC, and Bloomberg the next time, will any of the interviewers have the journalistic integrity to ask where those leading indicators stand? Will they question ECRI about its previous blown forecasts of recession in late 2011, and then most likely in the first quarter of 2012 but in any event by midyear? Or will it be a journamalistic fluffing, with ECRI being allowed to ignore its own, now busted, "tell-tale chart," and premiere some other rationalization?