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Thursday, October 30, 2008

ECRI Warned Us; We Are In A Recession Now

The US Department of Commerce says the US economy contracted at a 0.3% annual rate. A report released today says estimated third quarter (Q3) GDP growth was a negative 0.3% annualized rate. This is subject to revision in the future. Rex Nutting of MarketWatch summarizes:
  • The U.S. economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined at the fastest pace in 28 years, the Commerce Department estimated Thursday.
  • Final sales to domestic purchasers fell 1.8%, the largest decline in 17 years.
  • Consumer spending dropped 3.1%, the first decline in 17 years and the biggest drop in 28 years
  • business investment fell 1%.
  • Investments in homes fell for the 11th straight quarter.
  • Inflation-adjusted after-tax incomes fell 8.7%, the largest quarterly decline since the record-keeping began in 1947!!!!
Readers of this blog should not be surprised by this data as The Economic Cycle Research Institute, a New York-based independent forecasting group also known as ECRI, warned us right here on this blog earlier this year with the following articles as well as their regular "Weekly Leading Index" (WLI) updates that I cover in my newsletter and often report here.
  • Friday, January 25, 2008: "ECRI Says There Is A Window of Opportunity for the US Economy"
    The U.S. economy is now in a clear window of vulnerability, given the plunge in ECRI’s Weekly Leading Index (WLI) since last spring. Yet there is a brief window of opportunity within that window of vulnerability to avert a recession. That is why ECRI has not yet forecast a recession.
  • Friday, March 28, 2008: ECRI Calls it "A Recession of Choice"
    The U.S. economy is now on a recession track. Yet this is a recession that could have been averted. In January, given the plunge in the Weekly Leading Index, we declared that the economy had entered a clear window of vulnerability. Yet we emphasized the brief window of opportunity within that window of vulnerability for timely policy stimulus to head off a recession.
Congratulations to ECRI for correctly predicting a recession while the president and many others early this year were clearly saying the American economy was healthy.

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