In recent weeks, the ECRI Weekly Leading Index has declined sharply. It did so last summer too, supporting the dire forecasts of the Double Dippers. But it recovered during the fall, and the economy continued to grow albeit at a slow pace. The ECRI’s warning on Friday that a recession is imminent doesn’t jibe with the monthly indicators that have been coming out for the third quarter. Indeed, many of them suggest that real GDP should be up by around 2%. That’s not strong enough to lower the unemployment rate, but it beats a recession.
Among the strongest sectors of the economy right now is the auto industry. Auto sales rose during Q3, averaging 12.5 million units (saar), up 2.5% from Q2’s pace of 12.2 million units. That doesn’t seem like much, but it is boosting production. More importantly, sales ended the quarter very strongly at 13.1 million units. If they hold at that pace during Q4, then auto sales will also boost the current quarter’s real GDP. They might even do better given the decline in gasoline prices. That seems to be boosting demand for light trucks, which rose to 6.0 million units (saar) during September, the best pace since March 2008.
Another strong sector is the capital goods industry, where orders, shipments, and exports rose to new cyclical highs in August. Orders for machinery rose to a new record high during the month, led by construction & farm machinery. Also rebounding strongly are civilian aircraft orders and mining, oil field, and gas field machinery shipments. On the other hand, orders for electrical equipment have been stalled around cycle highs since late last year.