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Sunday, September 09, 2007

Chart of ECRI's WLI Growth Rate vs US GDP: 09/09/07


The growth rate of WLI is at a 43-week low. This decline has been signaling that we should expect the economy to slow and not repeat Q2's 4.0% GDP growth. The fear now is an external shock, such as a 9/11/01 like attack, could send the economy into a recession.

With ECRI's FIG at a 27-month low (see Sept 7th Jobs Report & ECRI's WLI & FIG) the Federal reserve has done its job to reduce inflation pressure and they should cut the Fed Funds Rate at their next meeting if not before.

It usually takes months for Fed Funds rate changes to show in the GDP numbers, but the signal to the markets they are on top of the situation could ease fears and help insure a soft landing.

  • ECRI is Economic Cycle Research Institute
  • FIG is Future Inflation Growth
  • WLI is Weekly Leading Index
I cover what this chart means to the stock market in "Kirk's Investment Newsletter."

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