On http://www.businesscycle.com/reports_indexes/reportsummarydetails/1091 one can read: "Early last week,
ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And
there’s nothing that policy makers can do to head it off". I consider this announcement to be a very serious call: the ECRI people are clearly on the smart side of life and they did not issue a false call over the last three recessions (if I'm counting right this means a time span of almost 30 years!). So let's go a little bit deeper into this topic:
- In this entry I propose a short (though quite detailed) analysis of the ECRI-WLI: I provide this analysis because according to ECRI their "leading indexes are not model-driven... leading indexes are not, in any sense, statistical models of the economy", see 4. Therefore, I'll apply some sophisticated statistics to the raw numbers of the WLI (a combination of non-linear and linear real-time filtering). As we shall see, the outcome of this analysis supports their call.
- In the next entry I'll then contrast these results with other US-indicators - including the USRI -. As we shall see, evidences are conflicting with the ECRI-call.
- In the last entry on the topic I'll attempt to interpret these (conflicting) results.
Since positions are firmly taken, I therefore propose a horse-race: recession-call (by the ECRI) against on-going recovery (by some other indicators, including the USRI). This true out-of-sample experiment fits very well into the context laid-out in
1 (fair forecasting competition).
