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A fun day from beginning to end. It's about time.

Well, that was encouraging. The major indexes closed up about 3% yesterday, primarily on good news from Europe concerning the debt crisis there.

Now if we could string 10 more days like today together, we'd all be feeling a lot better. But every party has a pooper, that's why we read the analysts at the Economic Cycle Research Institute. According to this NY Times article:

Are we heading into another recession now? Again, the consensus says we’re not.

But at least one organization with an exceptionally good track record says another recession may already be here. That is the Economic Cycle Research Institute, a private forecasting firm based in Manhattan. It was founded by Geoffrey H. Moore, an economist who helped originate the practice of using leading indicators to predict business cycles. Mr. Moore died in 2000, but the team he trained is still at work.

Relying on a series of proprietary indexes, the institute correctly predicted the beginning and the end of the last recession. Over the last 15 years, it has gotten all of its recession calls right, while issuing no false alarms.

That’s why it’s worth paying attention to its current forecast. It’s chilling: as bad as the economy has been, it’s about to get worse.

But let's not end such a hopeful day on a negative note. You'll be happy to know that not everyone agrees with the ECRI's take. This guy, for example:

As for the economy, [last Monday] we noted that 14 of the 18 economic reports issued in the previous week came in better than expected. That trend continued last week with 11 of the 16 releases showing better than estimated results. Of particular interest were better than anticipated numbers on employment, vehicle sales, vehicle production, construction spending, and manufacturing/non-manufacturing PMIs. In fact, the composite Purchasing Managers Index is consistent with +1.8% GDP growth for 3Q11. Additionally, U.S. Machine Tool Orders have soared, same-store sales for the average casual dining chain were up 2% in September (an acceleration from August) and railcar traffic trends for the past two weeks have been quite strong (particularly intermodal).

All of this is inconsistent with an economy entering a recession. As stated, we guess people could actually talk themselves into a recession, but at the current time the metrics actually suggest the economy is marginally strengthening. To be sure, cyclical sensitive sectors, namely housing, has been so weak it is difficult to envision how much more it can contract. Household balance sheets have improved since the 2008/2009 “Financial Fiasco.” The trade deficit is likely to improve due to slower import growth and a decline in energy and commodity prices. Said price declines should also check headline inflation and lift households’ purchasing power.

Which view is correct? Don't know, because as I pointed out last week, "It's tough to make predictions, especially about the future ( Members Only)." But as all the drama unfolds, we try to give you both sides of the story.

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Posted by Austin at 2:45 PM | Comments (0) | TrackBack
Category(s): Economy
Tag(s): debt crisis, economy, predictions

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