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Back in late April, amid rampant pessimism about the economy, the Economic Cycle Research Institute (ECRI) predicted that the recession would end this summer . The leading indices on which we based that call have since seen a synchronized surge. In fact, the cyclical improvement in the economy is proceeding in a textbook sequence, from long leading indicators to short leading indicators to coincident indicators. In essence, there are now pronounced, pervasive and persistent upturns in a succession of leading indices of economic revival. When approaching a cyclical turning point in U.S. economic growth, the growth rate of the U.S. Long Leading Index (USLLI) typically turns first, followed by the growth rate of the Weekly Leading Index (WLI), growth in the U.S. Short Leading Index (USSLI) and growth in the U.S. Coincident Index (USCI). Notably, the levels of the USLLI, WLI and USSLI are all rising. In fact, the chart below shows that by May, USLLI growth (top line) had already surged to a four-year high. Meanwhile, WLI growth (second line) has spurted to a two-year high, having crossed into positive territory. Following in their footsteps, USSLI growth (third line) has shot up to a one-year high, though it's still in negative territory.
Growth Rates (%) of Leading and Coincident Indices
Finally, the USCI is still slipping, indicating that as of June, the U.S. economic recovery had not yet begun. Yet USCI growth (bottom line), which represents the rate of growth of aggregate economic activity, has now risen for three months. While still in negative territory, it's now at a six-month high; almost certainly, the upturn in the growth rate cycle we predicted in April is now in progress.