ECRI expects ‘double dip scare’

Cross-posted from Credit Writedowns

Below is a video of Lakshman Achuthan, co-founder and chief operations officer of the Economic Cycle Research Institute (ECRI), talking about the economic outlook for the US. I profiled Achuthan’s views on a broad US slowdown when I wrote in May about why a global slowdown will hit by summer. Now that we are in Summer, both economic and earnings growth estimates are being cut. The question is “what should we expect going forward?” Achuthan answers this in speaking with Matt Miller, Deirdre Bolton and Lizzie O’Leary on Bloomberg Television’s "InsideTrack". He also also discusses corporate earnings.

Note that last year we had a slowdown which analyst Albert Edwards could foresee as far back as April. Throughout the summer, many people were using at the change in the ECRI’s leading indicators as a potential sign of a double dip. Achuthan repeatedly assured us there was no a double sip sign, telling Barron’s in June:

“While the plunge in WLI growth to a one-year low assures a significant slowing in U.S. economic growth in the coming months, the recent weakness has not lasted long enough to signal a new recession threat.”

When I wrote a note on recessions and recoveries in September, I mentioned that Achuthan thought we had even odds of a double dip. Eventually, the double dip threat faded. Achuthan was saying no double dip recession by October of last year even as the Fed started QE2 to deal with the slowdown.

For his part, Achuthan proved to be an accurate forecaster of the economy throughout that episode. Timing-wise, this dip is similar. I would say, though, Achuthan seems less optimistic this year than last. Take a look. I think this is a good segment.

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About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward


  1. Cathryn Mataga

    Yeah, based on the ‘Japanese lost decade model’ I think we should be about due for the second dip. I think the timing in Japan was that the politicians freaked out over large deficits and tried to balance the budget, and that triggered a second collapse. I’m expecting local state and the federal government to wring the money out of the dwindling middle-class to fill the gap while the banks also tighten the vise on all those underwater mortgages.

    Ultimately, we’ll be unemployed and homeless as we mine the abandoned suburbs for copper water pipes to send back to China. It’ll be like that road warrior movie, except no Thunderdome. (getting into the spirit of gloom)

      1. Procopius

        That sounds so much like, “Freedom’s just another name for nothin’ left to lose.”

  2. Fester Rimshot

    I ponder, what % of the recent corporate profits are actually just price hikes from delusional inflation.

    1. Alex

      I think Achuthan’s point was that even corporations are looking at a downturn in the near future. It was a Bloomberg segment, remember. They are much more concerned with corporate profits than wages and salaries.

  3. Demobust

    Deirdre Bolton and Lizzie O’Leary… WHAT Bubble heads they are! Not one vaguely insightful question. Commentators take note let a knowledgeable guest speak! The other you can throw softballs at.

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