ECRI WLI: Has the growth rate bottomed?

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*** STOP PRESS *** The smoothed annualized ECRI growth rate has just been announced and increased to -6.9% from an unrevised -7% – an improvement, but still indicating a fragile recovery.

The smoothed annualised growth rate of the ECRI hit a low of -11% at the end of July. The growth rate improved to -7.0% in the week ended October 1.

Sources: Dismal Scientist; Plexus Asset Management.

Based on unchanged initial jobless claims of 445 000 for the current week the smoothed annualised growth rate of initial jobless claims declined to 8.39% from 8.17% the previous week.

Sources: Dismal Scientist; Plexus Asset Management.

Sources: Dismal Scientist; Plexus Asset Management.

The smoothed annualised growth rate of materials as measured by the Economist Metals Index increased to 19.6% from 16.5% the previous week.

Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.

Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.

The smoothed annualised growth rate of the S&P 500 increased to 5.0% from 2.2% the previous week.

Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.

Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.

The smoothed annualised growth rate of the yield on the US 10-year government bond fell to -49.1% from -47.7% the previous week.

Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.

Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.

With three out of the four indicators I monitor showing improvement in the smoothed annualised growth rate of the ECRI WLI, I expect the number for the week ended October 8 to come in at between -6.4% and -6.6% when it is announced later today.

Looking forward at the trend expected for this week, based on Thursday’s closing levels the smoothed annualised growth rate of the yield on the 10-year bond will deteriorate further to 49.9% from 49.1%; that of the Economist Metals Index will improve to 23.2% from 19.6%, while that of the S&P 500 will slow to 2.2% from 5% last week. If the initial jobless claims do not deviate by much from last week’s 445 000, the smoothed annualised growth rate thereof will fall to -10.3%. If jobless claims come in 20 000 higher than last week, the growth rate will increase to -8.2% compared to last week’s -8.4%, while a drop of 20 000 will take the growth rate down to -12.5%. In short, I expect the ECRI WLI’s smoothed annualised growth rate for this week (published Friday, next week) to come in slightly weaker.

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