Source: Bianco Research

Business Insider – ECRI CHIEF ACHUTHAN: I’m Sticking With My Recession Call, The Numbers Are Still Awful

ECRI chief Lakshman Achuthan is on CNBC. Last year he called for an imminent recession. Since then the economy seems to have improved quite a bit. He’s still not backing down. Here are some key points he’s making:

* Mostly the financial markets are responding to Fed juicing.
* He admits the jobs picture has done a bit better.
* But jobs will get bad again, as the consumer flags.
* He says he always predicted the recession would come in the first half of 2012, so he still has time.
* The “full array” of leading indicators is not negating his recession forecast.
* GDP, industrial production, sales growth, etc… he says they’re all getting worse.

Category: Cycles, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

29 Responses to “Is A Recession Still Coming?”

  1. Pantmaker says:

    It cracks me up that Achuthan has become such a target of ridicule for economic and market bulls. He is their proverbial slope of hope. My feeling is that he is dead nuts right in his call.

  2. obsvr-1 says:

    just as many are one financial shock away from bankruptcy (insolvency); US is one shock away from recession …

  3. AHodge says:

    i’ m the other way
    I have respected lakshman in the past, ECRI is solid statistically. But
    1 he is ready to exaggerate ECRIs accuracy
    2 he looks caught in a classic wont change his mind box from his earlier public pronouncements

    Ill go big bucks– even money there is no NBER recession start 1H.
    He has a shot perhaps but only an outside shot–no way to run a forecast

  4. JimRino says:

    People are tired of the recession.
    Period.

  5. ES says:

    I think it is coming. I sold 80% of my longs 2 weeks ago. I had 2 reasons mainly : high oil prices and market pushing at resistance. But also, expectations for economy are way too high given that earnings ar enot that great, rail traffic was falling.
    The structural issues are not solved and everything FED could do to juice the markets it has done. Now economy has to stand on its own wobbly feet and it doesn’t seem to be able to. Most of the investment I see is done in overseas markets not the US. US high labor costs is insurmountable problem longterm.

  6. dina says:

    IBM fired 2000 employees last week and Yahoo is planning to fire few thousands next week. Why are they firing if the economy is growing?

  7. Molesworth says:

    Mr Achuthan said in Dec Bloomberg interview that if we’re not in recession by June, then they were wrong. He has remarked in numerous interviews over the years that ECRI is agnostic about the economy: not a perma bear or perma bull, just a reporter of the numbers.
    But if anyone shorted in Sept when ECRI announced their recession call, they are unhappy today.

    And Ahodge has a good point. If ECRI is wrong, big $$ renewals will not be forthcoming; their business will suffer. Could be that ECRI is suffering from a narrative fallacy.

  8. Petey Wheatstraw says:

    JimRino:

    Nowadays, recession is a technicality. Reality has nothing to do with it, and reality be damned if it won’t get in line with the numbers. So, I must ask, based on “the numbers,” what recession?

  9. Bob A says:

    -1% … +1%… BFD

  10. GeorgeBurnsWasRight says:

    The question is not whether ECRI is perfect. No one’s perfect in predicting the future.

    The main question is whether ECRI’s record is good enough to be worth paying attention to, and perhaps, paying them money for. A baseball player gets a significantly different salary for batting .280 than .250, for example.

    A question for the future is whether ECRI’s indicators are becoming less reliable.

  11. AHodge says:

    several of you are talking hard times and economic pain
    we are of course there in level.
    but technical recession and recovery is all about direction.
    you may not care which way we are moving but i do
    if you dont like the recession definition
    no sense discussing it?

  12. 22.5% unemployment. Is the depression going to get worse?

  13. bear_in_mind says:

    As Lakshman has accurately pointed out many times, we won’t know when the economy has tipped into recession until several months, if not 1-2 quarters, into the future. History has shown the stock market often late to react to recession signs, followed by an over-reaction as denial is shattered.

    Many exogenous factors (i.e. oil, Iran, PIIGS and Greece, derivative black pools, etc.) not to mention impending 2013 tax increases, could shift the U.S. from a slow recovery into recession. Then again, QE and other factors may keep the economy just above stall speed. We’ll see…

  14. Petey Wheatstraw says:

    I don’t see how we could possibly go into recession. After all, we cleaned up the mess the bankers made, indicted and tried the guilty parties, unwound all of the toxic securities and derivatives they generated, liquidated all of the mispriced “assets” held on the bank’s balance sheets, put everybody back to work in jobs that pay a living wage, and passed all of those laws making sure that this type of thing couldn’t happen again.

    Anyone thinking we’re headed into another recession is a classic doom and gloomer.

  15. James Cameron says:

    Nowadays, recession is a technicality. Reality has nothing to do with it, and reality be damned if it won’t get in line with the numbers. So, I must ask, based on “the numbers,” what recession?

    —–

    Amen.

  16. Bob A says:

    Shiller on cnbc today ‘this maybe the bottom’ (in housing)

  17. mathman says:

    “People are tired of the recession.”
    - “that’s a doosy Judge” (from Caddy Shack)

    As if they have any choice in the matter! For the top money-people it always looks rosy (“opportunities abound”). For the rest of us, whose pockets, bank accounts, homes, jobs, health-care, and any retirement income have been “picked” – it has only gotten worse (and we fully expect it to continue to worsen in the coming years).

    To me, it doesn’t just look and feel like a recession, it’s the beginning of the great collapse of civilization.

    Hey, so enjoy yourself and appreciate what you have while you can.

  18. Futuredome says:

    The FED taint juicing a thing right now outside what they already have done. When is people like Achuthan gonna figure that out? Heck, I am to the point now, the FED should start normalizing assets used to fight the systematic failure. Any failure is under Frank/Dodd process and those banks don’t want that.

    The problem is really simple. The US can’t grow as much as in past. That is a simple fact. We simply can’t. This is where ECRI is failing. The failing becomes a representation of systematic failure of indexes like ECRI.

  19. wally says:

    http://www.businesscycle.com/reports_indexes/reportsummarydetails/1091

    I don’t see a date in this ‘call’. An open-ended prediction is no prediction alt all… of course we will have a recession – someday. If the ECRI wants to boast about accuracy, then it has to put dates of its forecasts, and meet them.

  20. rktbrkr says:

    ECRI will be bailed out of a bad call by the high gas prices.

  21. Ted Kavadas says:

    One “casual” observation that can be made about the two ECRI charts shown is that they both look to be currently experiencing a(nother) “dead cat bounce.”

    I recently put together an update to 10 charts that I have created that represent various facets of the economy. In total, IMHO they show a rather disturbing picture, especially at this point in the recovery/expansion:

    http://economicgreenfield.blogspot.com/2012/02/disturbing-charts-update-6.html

  22. VennData says:

    Dina,

    IBMs’ model is to take over whole IT departments for decade long contracts. They go in and trim the fat, the staff become IBM employees. To make money IBM applies best practises and improves performance and productivity over time.meaning they slowly can the employees, meaning they better ( the more contracts they get) the more people they fire. It is, in fact, a number that shows IBM has been doing great.

    Who cares what Yahoo does?

    The idea that some collection of statistically trends can predict the future of an economy is fanciful. A bunch of back testing can shoe something “works” until it doesn’t anymore.

    Of course he sticks to his guns. He has a business model predicated on fallacy and makes money off people who believe that the future can be divened fro economic numbers, physics-like. It can’t.

  23. 4whatitsworth says:

    Maybe the numbers are actually better now. Sarbanes Oxley has cleaned up the balance sheets of corporate America so 1.5-2.5 % GDP may not be so bad. Profits are up and un employment is down.

    There is the looming tax increases and run away govenment spending that needs to be addressed and that will cause some pain and perhaps a well earned recession but that’s not happening in the next 6 months so barring a 911 event I just can see anything other than 2% GDP to the election.

  24. Winston Munn says:

    The most likely scenario in my mind is for the U.S. to rhyme with Japan and muddle along between slow growth and mild recession until who knows when. The latest 3% GDP had a large inventory build component, which will convert to an overproduction negative if consumer spending slows down – but inventory is not a big enough number to be casue anything but a mild and shallow recession if there is a recession.

  25. radicall says:

    Gotta love Petey Wheatstraw’s Comment!

    Ted Kavadas: How about adding a couple more disturbing charts? Instead of Unemployment figures, which lie a lot more than employment figures (which themselves don’t account for underemployment) Here is a good one:

    Civilian Employment Ratio (Best viewed for 20-25 year timeframe rather than the default 65 years)
    http://research.stlouisfed.org/fred2/graph/?id=EMRATIO
    http://research.stlouisfed.org/fred2/series/M2V

    And the table here on Income inequality which shows that income inequality in a worse problem in US than it is in Iran, Uganda, Nigeria, Guyana, Ivory Coast, etc (which in my opinion is partly related to drop in Velocity of money, apart from balance sheet expansion)

    http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

  26. Futuredome says:

    How about adding a couple more disturbing charts? Instead of Unemployment figures, which lie a lot more than employment figures (which themselves don’t account for underemployment) Here is a good one:

    That isn’ t a disturbing. There is no lie. Employment and unemployment figures have been processed in the same system since 1948.

    Either you get that or you don’t. It is like Wheatstraw’s inability to understand that “corruption” in capitalism is eternal. It will always exist.

  27. Ted Kavadas says:

    @radicall: yes, I agree that those charts are disturbing as well. I should add the EMRATIO to the unemployment-related charts I post.

    IMHO the velocity of money chart (M2V) really lacks recognition. I posted three (M1, M2, MZM) of those charts last week as Lakshman Achuthan mentioned the velocity of money in his CNBC interview on 2/24/12.

  28. In his Autumn interviews, Lakshman Achuthan was quite clear to say an NBER defined Recession had commenced between Sept 23 & Oct 7 2011. And, this would be obvious by mid-2012 at latest in case Q1 was positive GDP. He explained a negative Q4 & Q2 would meet the definition and would thus be confirmed by BEA by the end of July 2012 at the latest.

    With Q4 thrusting a dagger threw the heart of that false positive, on Feb 26th he proposed another Recession may start mid 2012. This will be a second false positive by ECRI if the TRENDLines Recession Indicator projection comes to fruition.

    The TRI has consistently shown since July 2011 that 2012H1 would be the worst upcoming months. At no time was there danger of negative 2011Q4.

    TRI quantification of forward-looking economic data releases since July has shown 2012H1 improving with each monthly revision.

    At this time, it appears Q1 GDP is on a 2.8% pace. Q2 is 2.0%. After a trough of 1.7% in July, GDP will surge to 3.1% by October.

    TRI chart: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm

  29. junkndump says:

    @ Freddy Hutter: Do you have a source/reference for your lead-off statement?

    “In his Autumn interviews, Lakshman Achuthan was quite clear to say an NBER defined Recession had commenced between Sept 23 & Oct 7 2011. “