ECRI Watch: Growth adjusted downwards, further weakening ahead!

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The ECRI Weekly Indicator for the week ended August 13 came in at 120.8 compared to the previous week’s downward adjusted 122.0. The closely watched ECRI WLI Smoothed Annualised Growth Rate came in at -10.0% compared to the downward adjusted -10.2% (previously -9.8%) of the previous week. That compares with our forecast of “weakened”.

The smoothed annualised growth rate of the S&P 500 fell from 2.4% to 0.6%.

Sources: ECRI (various internet sources); I-Net; Plexus Asset Management.

The smoothed annualised growth rate of the 10-year bond yield deteriorated further to -38.2% from -32.9%.

Sources: ECRI (various internet sources); I-Net; Plexus Asset Management.

The smoothed annualised growth rate of initial jobless claims has turned positive for the first time since the last week of August last year as claims surged to 500 000. The growth rate of initial jobless claims surged from ‑4.3% to a positive 2.1%.

Sources: ECRI (various internet sources); FRED; I-Net; Plexus Asset Management.

The ECRI WLI smoothed annualised growth rate for the week ended August 20 (to be released on Friday, August 27) is likely to disappoint further. Based on last week’s closing level the smoothed annualised growth rate of the S&P 500 turned from a positive 0.6% in the previous week to minus 1.5%. The smoothed annualised growth rate of the 10-year bond yield continued to weaken rapidly from -38.2% to -43.4% last week. If initial jobless claims remain unchanged at 500 000 the smoothed annualised growth rate of initial jobless claims is likely to rise to 5.3% from 2.1% the previous week.

Gauge of this week’s ECRI WLI Smoothed Annualised Growth rate based on the week ended August 20:

ComponentLast week

20 August

Previous week

13 August

Momentum
Smoothed Annualised Growth
S&P 500-1.5%+0.6%Weakened slightly
10-year bond yield-43.4%-38.2%Weakened sharply
Initial jobless claims*+5.3%+2.1%Increased rapidly
Conclusion
ECRI WLI Weakened-10.0%

*Based on unchanged 500 000 initial claims.

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