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Tuesday, July 21, 2009

Conference Board Indicators: Recession Is Over, Recovery Has Begun

Since early June we've been observing more and more markers that US economic recovery has started. Monday brought even more data to support that assertion.

A close look at the elements of Monday's Conference Board report supports the view that the recession ended in June and recovery has indeed begun. The CB's leading index posted a third month of consecutive gains rising 0.7 percent in June. Again the gain was much stronger than most economists had expected.

With reporting of the June data, several recession-ending items within the CB’s report are now in place. Most economists agree that these data need to be in place before a recession is officially considered over...

1. Three straight gains in the ratio of coincident-to-lagging indicators, (check)

2. Three months of 50-plus readings in the diffusion index, (check)

3. Three consecutive gains in the leading index along with an annualized reading over that period in excess of 10 percent. (The data shows a 12.8% annual rate -- the best since Jan 2002) (check)

The three check boxes follow last week's Economic Cycle Research Institute (ECRI) Weekly Leading Index which surged to an annualized five-year high of 7.0%.

This is just more data to support the claim that when NBER's cycle-dating committee finally marks the official 2008-2009 recession end, it will point to June 2009.

You may recall a professor from Kansas make that recession-ending prediction back in November 2008.

Given the strength of the current ECRI growth indications and the CB's LEI trends, those predicting a lackluster Q3 of growth are likely to be significantly surprised.


  1. Of the three forecasts you cite, ECRI seems most practically useful. The professor's forecast, while earliest, in all due respect, would have been hard to act on because of lack of reliablility, track record, etc. The Conference Board is somewhat "late," so that leaves ECRI where their leading indexes (which have a great track record, background, etc.) have been recovering since late 2008, and in April they made the call that recession ends this summer.

  2. What was most impressive about the professor's prediction, was the call that we would likely return to growth by July 4th.

    The other two reports give us significant guidance on the strength of the renewed growth in Q3.


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