ECRI Index – Weekly Leading Index (WLI) and Year-Over-Year Change (thru Week Ending May 11, 2012)

ECRI Index (also known as the ECRI Weekly Leading Index) is published weekly.  It is designed to predict the direction of economic growth in the next 6-9 months.  On this page, I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

NOTE: I have decided to stop looking at the weekly index level for trends.  Instead, I will look at a 4-week moving average of the index level.  I am making this change because the weekly readings have too many ups and downs for which to detect meaningful trends, so this will smooth it out better.  The second component I analyze will continue to be the year-over-year change in that 4-week moving average.

The Economic Cycle Research Institute (ECRI) does something very similar to the Leading Economic Index from The Conference Board, but they are not at all transparent about how they do their calculations.  We can only wait to see what they publish as their index level and see where it leaves us.  But many people believe this is a good leading indicator for the economy.

Specifically, we will focus on two components of the indicator:

• Weekly Leading Index (WLI) 4-Week Moving Average – This is average of the four most recent values of the index released each week.  I prefer to look at this “smoothed” rate because the individual weekly readings have too many ups and downs for which to discover any meaningful trends.
• Weekly Leading Index Year-Over-Year Change in 4-Week Moving Average – Rather than using the ECRI’s complicated calculation for an annualized growth rate, which ECRI admits doesn’t do a great job of adjusting for seasonal patterns, it is easier to compare the level of the index to its level one year prior.  To smooth things out, we will do this using a four-week moving average.  So, it will be like asking, “What’s the difference between the average of the 1st four weeks of the index in 2012 versus the 1st four weeks of 2011?”

Here is a graph of the ECRI Index (WLI) for the past year from ECRI:

Source: BusinessCycle.com

ECRI Index Trends and Projections

Below, I will discuss whether the ECRI Index is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. continue reading…

ECRI Index – Weekly Leading Index (WLI) and Year-Over-Year Change (thru Week Ending May 4, 2012)

ECRI Index (also known as the ECRI Weekly Leading Index) is published weekly.  It is designed to predict the direction of economic growth in the next 6-9 months.  On this page, I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

The Economic Cycle Research Institute (ECRI) does something very similar to the Leading Economic Index from The Conference Board, but they are not at all transparent about how they do their calculations.  We can only wait to see what they publish as their index level and see where it leaves us.  But many people believe this is a good leading indicator for the economy.

Specifically, we will focus on two components of the indicator:

• Weekly Leading Index (WLI)  - This is the actual value of the index released each week.  It will change more rapidly than the growth rate measure mentioned below.
• Weekly Leading Index Year-Over-Year Change in 4-Week Moving Average – Rather than using the ECRI’s complicated calculation for an annualized growth rate, which ECRI admits doesn’t do a great job of adjusting for seasonal patterns, it is easier to compare the level of the index to its level one year prior.  To smooth things out, we will do this using a four-week moving average.  So, it will be like asking, “What’s the difference between the average of the 1st four weeks of the index in 2012 versus the 1st four weeks of 2011?”

Here is a graph of the ECRI Index (WLI) for the past year from ECRI:

Source: BusinessCycle.com

ECRI Index Trends and Projections

Below, I will discuss whether the ECRI Index is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. continue reading…

ECRI Index – Weekly Leading Index (WLI) and Year-Over-Year Change (thru Week Ending Apr 27, 2012)

ECRI Index (also known as the ECRI Weekly Leading Index) is published weekly.  It is designed to predict the direction of economic growth in the next 6-9 months.  On this page, I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

(NOTE: I recently decided to change one of the ways I analyze the trend in the ECRI Index.  According to the ECRI itself, the complicated method they use to give an “annual growth rate” for the index doesn’t do a great job of adjusting for seasonal patterns.  The best way to get around that is simply to compare the level of the index to one year prior.  Even better is to do a four-week moving average and then compare that to the four-week moving average for one year prior.  This should help give a better sense for what the ECRI Index is telling us.)

The Economic Cycle Research Institute (ECRI) does something very similar to the Leading Economic Index from The Conference Board, but they are not at all transparent about how they do their calculations.  We can only wait to see what they publish as their index level and see where it leaves us.  But many people believe this is a good leading indicator for the economy.

Specifically, we will focus on two components of the indicator:

• Weekly Leading Index (WLI)  - This is the actual value of the index released each week.  It will change more rapidly than the growth rate measure mentioned below.
• Weekly Leading Index Year-Over-Year Change in 4-Week Moving Average – Rather than using the ECRI’s complicated calculation for an annualized growth rate, which ECRI admits doesn’t do a great job of adjusting for seasonal patterns, it is easier to compare the level of the index to its level one year prior.  To smooth things out, we will do this using a four-week moving average.  So, it will be like asking, “What’s the difference between the average of the 1st four weeks of the index in 2012 versus the 1st four weeks of 2011?”

Here is a graph of the ECRI Index (WLI) for the past year from ECRI:

Source: BusinessCycle.com

ECRI Index Trends and Projections

Below, I will discuss whether the ECRI Index is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. continue reading…