RecessionAlert Weekly Leading Index

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The RecessionAlert weekly leading economic index (WLEI) is a composite for the U.S economy that draws from over 20 time-series and groups them into the following six broad categories which are then used to construct an equally weighted average.

Here is an excerpt from the description:

As with all weekly indices though, the data is far more volatile than monthly or quarterly indicators and the WLEI components are therefore subject to more false positives (calling recession when one does not occur.). The WLEI is heavily weighed toward financial market data, but the obvious advantage of this is that data revisions are minor and isolated to the Labor Market Composite and small portions of the Credit Market Composite.

RecessionAlert WLEI: The Latest Data

As of May 19th, the index was at -4.015, up 3.364 from the previous week. This is the seventh consecutive week the index has increased and is the highest reading since the week of June 3, 2022. The index has been in negative territory for the past 53 weeks, beginning the week of May 20, 2022.

The first chart uses data going back to 1973 and includes recession starts.

The index's average at the start of the seven recessions shown above is -11.512, a level we are currently above, with a range of -43.772 to 40.720. The value of the WLEI at the start of six recessions before the COVID-pandemic were negative, so the latest recession could be considered an outlier. If we take out that value, then the average drops to -20.218, a level we hovered near for the last several months.

Here I've zoomed into the turn of the century and added in ECRI's WLIg for comparison. As you can see, the ECRI indicator has repeatedly shown conspicuous contractions between recessions, enough to make an erroneous recession call while the WLEI did not trigger such a call. Both indicators generally move in the same direction, but the WLEI less volatile.

Note: We have discontinued our weekly update for the ECRI Weekly Leading Index.

Let's look at the comparison with GDP growth since 1970. Not all negative GDP and slow growth have been matched by the WLEI, but all recessions match.