Friday, September 30, 2011

What lies ahead?

It does not appear we are out of the woods yet. Too many people forget
that these recession last longer than just a couple of years.

I just bought another house, but I don't expect to be able to sell
it for another 10 years. Yes, that is correct, in my opinion things will
be bad for another 8-10 years.

From the Journal of Commerce

Forecasting firm says all signs point to weakening economy

The U.S. is headed into new recession, Lakshman Achuthan of the Economic Cycle Research Institute, a forecasting firm known for accurately predicting turns in the business cycle, warned on Friday.

Achuthan sounded the warning in interviews on Bloomberg Radio and CNBC. He said ECRI’s forward-looking indicators provide an “overwhelming message” that an economic downturn is on the way.

"There is virtually nothing that can be done to avert what is going to happen," he said.

ECRI’s U.S. Long Leading Index, which forecasts economic shifts several months in advance, turned downward earlier this year, leading Achuthan to warn the mid-year downturn was more than a temporary blip.

That warning was confirmed by recent weakness in ECRI’s Weekly Leading Index, which signals shorter-term economic trends, fell to 121.9 this week, its lowest level since Sept. 3, 2010. The weekly index’s growth rate declined for the ninth straight week, falling to negative 7.2 percent.

One component of the Weekly Leading index is The Journal of Commerce-ECRI Industrial Price Index, which gauges industrial demand by measuring prices of 18 industrial commodities, some of which aren’t traded on exchanges.

The JOC-ECRI IPI has been on a steady decline since mid-April and fallen into negative territory over the last eight weeks, including an 8.5 percent slide last week.

“The vicious cycle is starting where lower sales, lower production, lower employment and lower income (leads) back to lower sales,” Achuthan told CNBC. He said "contagion in what is going on among those leading indicators. It's wildfire, it's recessionary, it is not reversible."

He said the best-case scenario is for a short recession, lasting about six months but ECRI has seen no indicators pointing to a turnaround yet.

He said the slowdown could affect exports, which have been a rare bright spot in the U.S. economy.

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