The lat­est smoothed annu­al­ized growth rate of the ECRI Weekly Lead­ing Indi­ca­tor of 10.2% pub­lished last week has con­tracted for the tenth con­sec­u­tive time since July.

Sources: Dis­mal Sci­en­tist; Plexus Asset Management.

In light of the sig­nif­i­cant move­ments in invest­ment mar­kets over the past week I had a look at what growth rate could be expected in this impor­tant num­ber that will be pub­lished at the end of this week for the period ended last Fri­day. To get to my fore­cast I use dif­fer­ent vari­ables that seem to explain the growth in the ECRI WLI fairly accu­rately. (Please note that I do not have knowl­edge of the pro­pri­etary ECRI WLI con­stituents and sim­u­late the Index purely on my own research.)

The smoothed annu­al­ized growth rate of the S&P 500 Index remains my best indi­ca­tor of the ECRI WLI growth rate.

Sources: Dis­mal Sci­en­tist; I-Net Bridge; Plexus Asset Management.

The con­trac­tion in the S&P 500‘s smoothed annu­al­ized growth rate over the past week eased to –13.4% from –14.9% after bot­tom­ing two weeks ago at ‑16.2%.

Sources: Dis­mal Sci­en­tist; I-Net Bridge; Plexus Asset Management.

The con­trac­tion in the smoothed annu­al­ized growth rate of the yield on the U.S. 10-year Gov­ern­ment Bond Index fol­lowed the same trend as that of the S&P 500 Index. The con­trac­tion eased to –65.2% from –70.8% two weeks ago. It is also inter­est­ing to note that the growth rate bot­tomed at lev­els sim­i­lar to those of the bot­tom in early 2009 dur­ing the 2008/2009 finan­cial crisis.

Sources: Dis­mal Sci­en­tist; I-Net Bridge; Plexus Asset Management.

The same can­not be said of my other impor­tant indi­ca­tor as my esti­mate for last week’s clos­ing level of the Econ­o­mist Met­als Index points to a deeper con­trac­tion in growth to 34.2% from 29.1% previously.

Sources: Dis­mal Sci­en­tist; I-Net Bridge; Plexus Asset Management.

Another indi­ca­tor I value is the growth rate of ini­tial job­less claims. Assum­ing that job­less claims were unchanged from the pre­vi­ous week’s 403 000, the growth rate declined to –6.4% from –7.8%. Ini­tial job­less claims needed to fall to 390 000 to con­tinue to exhibit a faster decline in growth.

Sources: Dis­mal Sci­en­tist; I-Net Bridge; Plexus Asset Management.

On bal­ance, I there­fore expect last week’s smoothed annu­al­ized growth rate of the ECRI WLI (to be pub­lished on Fri­day) to have con­tracted less than the pre­vi­ous week’s –10.2%. This week’s WLI growth rate is there­fore about to be the first eas­ing in the con­trac­tion since the end of July. Have we seen the worst growth rates of the ECRI WLI? Only time will tell, but yes, I think so.

Dr. Prieur du Plessis is an investment professional with 26 years' experience in investment research and portfolio management. More than 1,200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns, including his blog, Investment Postcards from Cape Town. He has also published a book, Financial Basics: Investment. Prieur is Chairman and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and a number of foreign countries. He also serves as Honorary Consul of Slovenia for South Africa, actively developing economic, cultural and scientific relations between Slovenia and South Africa. Prieur is 54 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His leisure activities include long-distance running, traveling, reading, motor-cycling and scripophily. Read more from the author/contributor here.

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