Lakshman Achuthan, the co-founder of the Economic Cycle Research Institute, which publishes a widely followed economic metric called the Weekly Leading Indexes, was on Bloomberg TV this morning discussing his firm’s call blast year that the U.S. economy would enter recession in the first quarter of 2012.
Achuthan has taken quite a bit of criticism over the fact that his call sounded very imminent, and yet the economy does not appear to be entering recession.
Achuthan said that not only does he stand by his call, but that he thinks we’re in recession in the U.S. already:
What we said back in December was that we thought the most likely start date for the recession would be in Q1, and if not then, by the middle of 2012. I’m here to reaffirm that.
In other words, I think we’re in recession already. As I said back there, it’s very rare that you know you’re going into recession when you’re going into recession. It often takes some big hit on the top of the head. In the last recession it took Lehman to wake people up. In the recession before it took 9/11.
When you look at the data today, you see industrial production is off of its April high. Manufacturing and trade sales – much broader than retail sales – is off of its December high.
Real personal income growth, which doesn’t always go negative during a recession, has been negative for several months. So, its consistent with a recession having already started, and GDP – newsflash: the first quarter of a recession very often has positive GDP.
Achuthan said the model hasn’t changed and that everything they saw in December that signaled a coming recession is still flashing warnings:
Back in December, looking at leading indicators…our best guess was Q1 as the start date. If not then, mid-2012. Then, we looked at coincident indicators a few months ago. They gave us the same answer.