Leading Economic Indicators Leading.. at a Crawl

The Conference Board has just released its data on Leading Economic Indicators for August, and the gain here is actually a drop when compared to recent months.  LEI in the U.S. rose by +0.6% in August.  This is a gain on the surface but follows a gain of +0.9% in July and a gain of +0.8% in June. The Conference Board LEI for the U.S. now stands at 102.5 for August.  This is actually right in line with estimates, as Bloomberg said the average estimate was 0.7% and the median point was 0.6%.

The group noted that the LEI fell for twenty months after peaking in July 2007, which it said was the longest downtrend since the mid 1970’s.  The Conference Board noted that the figures have risen since April and its gains have become very widespread and that the six-month growth rate continues to accelerate.

The downward trend in the coincident economic index as a measure of current economic activity also seems to be stabilizing, with the index flat so far this quarter.  Five of the ten indicators that make up LEI rose in August: supplier deliveries (vendor performance), the interest rate spread, stock prices, building permits, and the index of consumer expectations.

Also noted by the group, “These numbers are consistent with the view that after a very severe downturn, a recovery is very near. But, the intensity and pattern of that recovery is more uncertain.”

The negative indicators were as follows: real money supply, average weekly initial claims for unemployment insurance (inverted), and manufacturers’ new orders for non-defense capital goods.  The group noted that average weekly manufacturing hours and manufacturers’ new orders for consumer goods and materials held steady in August.

The Coincident Economic Index™ was unchanged in August, after a 0.1% gain in July and after a 0.4% drop in June. The Lagging Economic Index™ fell by -0.1% in August, above a -0.5% drop in July and a -0.9% drop in June.

As this is effectively in-line, it is having little market impact.  Unfortunately, these figures are up but not by much when you consider how much the market has recovered and by how much the expectations for growth are coming in.

JON C. OGG