Thursday, August 18, 2011

USA Monthly Leading Economic Index at Another Post-Recession High! (Chart) "Economy is slow, with little momentum"

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The Conference Board: USA Monthly Leading Index


Official Statement by The Conference Board The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.5 percent in July to 115.8 (2004 = 100), following a 0.3 percent increase in June, and a 0.7 percent increase in May. The largest positive contributions came from money supply, the interest rate spread, and average weekly initial claims for unemployment insurance (inverted).

Commenting on the USA LEI Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI continued to increase in July. However, with the exception of the money supply and interest rate components, other leading indicators show greater weakness – consistent with increasing concerns about the health of the economic expansion. Despite rising volatility, the leading indicators still suggest economic activity should be slowly expanding through the end of the year." Says Ken Goldstein, economist at The Conference Board: “The economy is slow, with little momentum, and shows no indication of acceleration. The gains in the LEI are modest, especially the nonfinancial indicators. Despite these growing risks, the economy should continue to expand at a modest pace through the fall."

Trend The short-term trend (3-month moving average) continues upwards. The LEI has increased for 3 consecutive months. The intermediate-term trend (6-month moving average) has continued upwards since April 2009, for 27 consecutive months. The long-term trend (12-month moving average) trends also continues upwards and has since 2009. The June 2011 increase is the 26th increase in the past 28 months (since the March 2009 Great Recession cyclical low of 97.9).

Cycle History The Leading Economic Index for July 2011 (preliminary) is at a Post-Great Recession cyclical high of 115.8, which exceeds the previous high in June 2011 of 115.2 (revised). The Great Recession cyclical low was 97.9 in March 2009.

Monthly Leading Economic Index (Chart) Below is a chart of the The Conference Board LEI, including the March 2009 Great Recession cyclical low of 97.9 through the latest month reported.


Commentary The July 2011 Leading Economic Index (preliminary) is encouraging and a Post-Great Recession cyclical high of 115.8. However, the increase mostly was a result of financial indicators and the drop in unemployment claims, not from manufacturing, consumer expectations, or housing indicators. "Economic activity should be slowly expanding through the end of the year." The USA Monthly LEI has come a long way from the March 2009 cyclical low of 97.9 (see chart above), but a dip in the LEI could occur in the next month or two.


About The Conference Board Leading Economic Index (LEI) for the U.S.

The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading, coincident, and lagging economic indexes are essentially composite averages of several individual leading, coincident, or lagging indicators. They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component – primarily because they smooth out some of the volatility of individual components.

The ten components of The Conference Board Leading Economic Index for the U.S. include:
Average weekly hours, manufacturing
Average weekly initial claims for unemployment insurance
Manufacturers’ new orders, consumer goods and materials
Index of supplier deliveries – vendor performance
Manufacturers' new orders, nondefense capital goods
Building permits, new private housing units
Stock prices, 500 common stocks
Money supply, M2
Interest rate spread, 10-year Treasury bonds less federal funds
Index of consumer expectations


About The Conference Board

The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: To provide the world’s leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States.


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