Monday, July 20, 2009

Leading Economic Index Signals End of Recession

NEW YORK (AP) -- More plans to build homes, higher stock prices and fewer people filing first-time claims for jobless aid sent a private-sector forecast of U.S. economic activity higher than expected in June. It was the third straight monthly increase for the New York-based Conference Board's index of leading economic indicators, and another sign pointing toward the recession ending later this year.

The index is meant to project economic activity in the next three to six months. If these conditions continue, "expect a slow recovery this autumn," said Conference Board economist Ken Goldstein.

The Conference Board's leading indicators index bottomed in March after peaking in July 2007 (see chart above). The decline accelerated last fall after investment bank Lehman Brothers collapsed and credit markets froze.

"We're now getting data which points to stabilization," said Josh Shapiro, chief U.S. economist at research firm MFR Inc. "The overall signal they're sending is the slide in economic activity is poised to end. The jury is still very much out in terms of what happens after that."

MP: The three consecutive increases in the second quarter (April, May and June) of 2009 is the first time in four years of three straight monthly increases in the Index of Leading Economic Indicators. And the 3.06% three-month increase in the Leading Index from March (97.9) to June (100.9) 2009 is the largest percentage increase for a three-month period since the 3.44% increase from October 2001 to January 2002 at the tail end of the 2001 recession. There was a similar 2.65% three-month increase from April to July of 1991 that signalled the end of the 1990-1991 recession. It sure looks like the Leading Economic Index is suggesting that the recession is over.

10 Comments:

At 7/20/2009 1:01 PM, Blogger QT said...

The problem of toxic assets however remains largely unresolved.

 
At 7/20/2009 1:04 PM, Blogger Alan said...

Although I think this recovery will be rather modest, I think it's important to understand the timing and implications of a recovery happening now.

First, it means the stimulus will have had limited if not zero impact on this recovery. Although the administration will try to spin a recovery as their doing, it will have had little to nothing to do with their efforts.

Second, the long-term impact of their spending and economic takeovers need to be highlighted. long term unemployment and limited growth are the children of the policy decisions that have been selected by this administration and congress.

http://buanadha.wordpress.com/2009/07/20/why-it-is-important-to-understand-what-is-happening-to-the-economy/

 
At 7/20/2009 1:24 PM, Anonymous Benny The Libertarian said...

I hear a lot of talk about commercial mortgages going sour. That raises an interesting question--since there is little government pressure or intrusion into the commercial mortgage market, why are they going bust?
Some say the commercial mortgage meltdown, now pending, will dwarf the home mortagge meltdown. I sure hope not.
Question for QT: I read there is no home mortgage interest tax deduction in Canada. True?
And have your housing markets been more stable?

 
At 7/20/2009 2:11 PM, Anonymous steve said...

wrote same earlier in the day in my blog, econmkts.blogspot.com, where i looked at the ratio of leading to lagging indicators. the upturn is going to be interesting -- especially for investors.

 
At 7/20/2009 3:16 PM, Blogger QT said...

Benny,

There is no tax deduction for mortgage interest in Canada. The real estate market has been cooling since 2008. There are certain markets where there have been huge run-ups in housing prices in recent years like Vancouver, Calgary and Edmonton. Our banking system is currently relatively sound

Real estate across Canada

 
At 7/21/2009 7:30 AM, Anonymous Slice said...

The economy has to recover at some stage. Most likely towards the end of the year.

 
At 7/21/2009 8:35 AM, Blogger juandos said...

"Second, the long-term impact of their spending and economic takeovers need to be highlighted. long term unemployment and limited growth are the children of the policy decisions that have been selected by this administration and congress"...

Well Alan I personally don't see any flaws in this particular statment of yours but have we seen the last shoe of government interference drop yet?

This administration and the Democrats are trying to insert the nanny state deeper into education and I wonder what that'll cost?

 
At 7/21/2009 8:46 AM, Anonymous Anonymous said...

There is no tax deduction for mortgage interest in Canada

Hopefully, q-tippy, you are neither a tax lawyer nor a financial planner because mortgage interest may be tax deductible.

Simple case. q-tippy and hubby have a $200K mortgage on their home + a $200K stock portfolio. Sell the stock portfolio, retire the mortgage, re-mortgage the home and re-buy the stock portfolio. Mortgage interest is now tax-deductible.

Back to the blog post headline. I'm interested to know the date when Perry prognosticates that the real GDP level will recover to the Q2.2008 peak level. Blogger asshats should be accountable. My asshat guess is Q4.2012.

 
At 7/22/2009 12:33 PM, Anonymous Greg said...

Mark Perry said: "It sure looks like the Leading Economic Index is suggesting that the recession is over."

That is ambiguous. If things are turning around, Perry can point at this thread to say that 'he was on top of it'.

But if things do not turn around, Perry can say 'he was only reporting the facts and not making a prediction'.

This was a wimp out by Perry.

Show some integrity Perry and put a stake in the ground and defend your predictions.

 
At 7/22/2009 6:52 PM, Anonymous Ἐγκώμιον Shill said...

Now just let me get this straight. The curve you now present is the PC, predictor curve. Now show the curve that will predict what the PC will soon do.

Who will protect you from your protector; but who will predict your predictor?

Who will predict the random march?

 

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