Anirvan Banerji, director of research for the Economic Cycle Research Institute, notes in a column today in RealMoney at TheStreet.com that the recession is now over. An excerpt from Anirvan Banerji's article:
When approaching a cyclical turning point in U.S. economic growth, the growth rate of the U.S. Long Leading Index (USLLI) typically turns first, followed by the growth rate of the Weekly Leading Index (WLI), growth in the U.S. Short Leading Index (USSLI) and growth in the U.S. Coincident Index (USCI). Notably, the levels of the USLLI, WLI and USSLI are all rising. In fact, the chart below shows that by May, USLLI growth (top line) had already surged to a four-year high. Meanwhile, WLI growth (second line) has spurted to a two-year high, having crossed into positive territory. Following in their footsteps, USSLI growth (third line) has shot up to a one-year high, though it's still in negative territory...
...But the sequential upswings in the leading indices aren't just about less negative growth -- we have pronounced, pervasive and persistent upswings in a succession of leading indices of economic revival, the most powerful possible predictor of a business cycle recovery. What's impressive here is the degree of unanimity within and across these leading indices, along with the classic sequence of advances in those indices. Such a combination of upturns doesn't happen unless an end to the recession is imminent.
If so, why is there such broad pessimism among analysts? The problem is a widespread inability to distinguish among leading, coincident and lagging indicators, along with the vast majority of economic indicators that don't fall neatly into any of those three categories. Thus, indicators are typically judged by their freshness, not their foresight. Because most market-moving numbers are coincident to short leading, while corporate guidance is often lagging, it's no surprise that analysts don't discern any convincing evidence of an economic upturn.
The arguments marshaled by standard-bearers of the pessimistic consensus hold little water. Usually, their "analysis" is based on gut feel, bolstered by any seemingly plausible argument that would support their case...
Recession Is Over
Updated July 19, 2009
Lakshman Achuthan, managing director of ECRI, speaks on NPR regarding the end of the recession:
Click to listen
The Recession Is Over ($)
RealMoney at TheStreet.com
By: Anirvan Banerji