The Recession Will Be Televised.

This article explains a little more on ECRI's thinking on the window of opportunity of averting recession.

MSN: Where's a safe harbor now?

Quotes:

There's an odd paradox at work, you see. Lakshman Achuthan, the head honcho of the Economic Cycle Research Institute, which has successfully called the past several U.S. recessions, notes that all the recent pessimism about the economy may actually have had a beneficial effect. He says that the biggest negative impetus in any recession comes from the manufacturing sector, which is in turn driven mostly by the inventory cycle.

Unaware of an approaching recession, he observes, businesses typically produce goods in anticipation of rising demand. When, to their surprise, demand for their products starts falling, inventories mount, forcing production and job cutbacks, thus reducing income and spending power. The spending cuts force further production cutbacks to work off the excess inventory, and a vicious downward spiral ensues.

At present, Achuthan says, we have the opposite scenario. Prolonged pessimism about the economy and a surprise acceleration in growth through last summer has resulted in a sharp drop in business inventories, taking the inventory-to-sales ratio to a record low. Thus there is little inventory left to whittle down in response to slackening demand, blunting much of the downward impulse for recession.

This is where Congress and the president come in. They can still throw American retailers, manufacturers and service providers a lifeline if they pass a $150 billion package of tax rebates quickly and cut checks in the next two months. If a timely stimulus results in a quick burst of consumer spending, manufacturers will boost production instead of reducing inventories, thus preventing economic Armageddon. Time is of the essence: The Economic Cycle Research Institute suggests even a three-month delay in getting rebate checks out could spell the difference between a bone-crushing recession costing thousands of jobs and a nice, soft landing.

Top Things We Don't Want to Hear - #2.

ECRI indicating the risk of recession is very high, and the window of opportunity to avoid it is about to "slam shut". ECRI has a pretty good track record of calling these things.

Reuters: Gauge of economy falls, recession looms: ECRI.

Quotes:

A weekly gauge of future U.S. economic growth fell hard and its annualized growth rate plunged to a six-year low, a research group said on Friday, indicating the risk of recession is very high.

....

"WLI growth has dropped back to the six-year low seen in early January," Achuthan said.

"While the economy and employment did continue to grow through the end of 2007, the window of opportunity to avert a U.S. recession is about to slam shut."

Goldilocks, meet Baby Bear.

I'd frankly never heard of this gentleman until about 4 or 5 months ago when I saw him on CNBC. His name is Hugh Moore, his firm is Guerite Advisors, and he appears to be gaining more notice in the press with his predictions for a mild recession in 2007 based on a model that he believes can predict recessions with very high accuracy rates. Mr. Moore claims the model has predicted recessions over the last 50 years with very few false alarms. It's not explicitly mentioned here, but I assume the model was developed with back tested data, which raises the question of whether the investigator just kept playing with the data until they got something they liked, which can lead to some questionable conclusions.

According to this interview, the data that go into the model are the inverted yield curve, housing construction rates as a percent of GDP, leading economic indicators, and their own in house indicator, 'the Guerite indicator', which he doesn't elaborate on further.

The interview is short, but his prediction is for a mild recession coming in mid to late 2007. Of the predictions for an upcoming recession, I would say this is one of the milder ones and one I find easier to mull over than the fairly dark views of people like Nouriel Roubini or, even more depressing, Warren Brussee.

CNBC Video: Hugh Moore, Guerite Advisors

Quotes:

"We don't believe in the soft landing, but then we also don't think that the world is going to hell in a handbasket either."