ECRI Index annualized change almost a lock for double dip territory

The ECRI Weekly Leading Index (WLI), a measure of future U.S. economic growth stands at 120.6 unchanged from a week ago. We first began actively talking about the WLI in April as a predictive indicator for either sustained recovery or a double dip recession. However, the gauge most of us are looking for is the annualized year-on-year change. Reuters says:

The index was last below 120.6 in the week of July 24, 2009, when it measured 120.3, according to ECRI. The index’s annualized growth rate fell to minus 9.8 percent from minus 9.1 percent the previous week, originally reported as minus 8.3 percent.

The index is saying that growth is slowing quite rapidly. But there is no imminent recession on the horizon. However, what happens by the end of the year or in 2011 is another story. David Rosenberg mentioned in June that a minus ten reading is a recession lock for the entire 42 years of ECRI data available. The minus 9.8 reading is about as close to a double dip warning as you are going to get from the WLI. These numbers are telling us that the manufacturing and inventory led recovery is so stalled that a double dip recession is likely within six months. (more)