CIBC World Markets is introducing a new index of leading indicators that is designed to signal changes in trends in the overall growth of the American economy.

CIBC says that the index has captured all major turning points in the economy over the past two decades, and looking ahead it sees weak growth.

The index uses neural networks technology, which is an artificial intelligence based system of information processing. Loosely inspired by the structure of the brain, neural networks learn by example and modify their structure on an ongoing basis.

“The EcoNet-US index is aimed to capture turning points in the economy. It is designed to turn three to six months ahead of real economic activity. The focus here is not on the absolute level of activity, but rather on changes in direction,” CIBC says. “We used eight leading indicators as inputs to the model while changes in real GDP were used to measure economic activity.”

“During the past five months, EcoNet-US fell by nine points, indicating that overall economic growth in Q4 and into early 2004 will be modest at best. The key negative factors here were the weakness in the labour market , further easing in consumer expectations, and a slower pace of growth in building permits. Another negative factor was the recent increase in long term interest rates.”