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Monday, June 15, 2015

ECRI Admits Incorrect Recession Call

by Calculated Risk on 6/15/2015 05:10:00 PM

This weekend I updated: Predicting the Next Recession.

In that post, I noted that I hadn't seen ECRI admit their recent series of recession calls were incorrect. Actually they have admitted an incorrect call, and here is their recent admission (ht M): The Greater Moderation

In line with the old adage, “never say never,” [ECRI's] September 2011 U.S. recession forecast did turn out to be a false alarm.
I disagreed with that call in 2011; I wasn't even on recession watch!

As an aside, their track record is not quite as good as they claim. For some interesting reading, see Mish's A Look at ECRI's Recession Predicting Track Record

In December 2007 (when the recession started according to NBER) - and when I was writing the economy was in recession - ECRI wrote: "weakness is not pervasive and persistent enough to be recessionary". Oops, missed.

And in January 2008, ECRI wrote: "This is why, having correctly predicted the last two recessions in real time without crying wolf in between, we are not forecasting one yet." Oops again.

As an aside, if investors sold when ECRI first made their recession call in Sept 2011, they would have missed close to a 75% increase in the market!

But Kudos to ECRI for admitting their error.