Early Warning on Economy

Weeks before Washington politicians took government dysfunction to a new level and the Eurozone crisis threatened to engulf Italy, a respected forecasting firm signaled an economic slowdown ahead.

The Economic Cycle Research Center’s Long Leading Index, which signals economic changes several months ahead, turned downward early this year. The negative turn was confirmed by other data, including ECRI’s Weekly Leading Index, which includes data from the Journal of Commerce-ECRI Industrial Price Index.

Over the years, the IPI, published weekly in the JOC, has proved a reliable gauge of inflation in a broad range of industrial materials. The IPI tracks 18 commodities, some of which aren’t traded on exchanges. Rising or falling prices tend to move in tandem with industrial demand.

Lakshman Achuthan, ECRI’s co-founder and managing director, said in June that the firm’s data pointed to a “pronounced, pervasive and persistent” growth slowdown that “is going to stick around for a couple of quarters, maybe more… I’m afraid it’s not a soft patch. It’s not something that’s a one- or two-month affair. The global industrial sector, which had been running pretty hot, has started to cool off.”

Unfortunately, it looks as if he may be right.

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