Saturday, October 23, 2010

Leading Economic Indicator Increasing, But Slowly

"The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.3% in September to 110.4, following a 0.1% increase in August, and a 0.2% increase in July (see chart above). Says Ataman Ozyildirim, economist at The Conference Board: “The LEI remains on a general upward trend, but it is growing at its slowest pace since the middle of 2009. There isn’t any indication of a relapse into another downturn through the end of the year.”

MP: While the Leading Economic Index rose in September for the third straight month, and has increased in 17 out of the last 18 months (since April 2009), the monthly increases in the LEI have started to slow somewhat this year, compared to the larger increases in 2009.  The chart above shows that following the last three recessions, there were times during the first year or two of the new economic expansions when the LEI flattened out for a period of 6-12 months, before gaining new momentum in economic growth.  It's possible that we are seeing the same phenomenon right now - a temporary slowdown through the end of the year, followed by stronger economic growth next year.

In contrast, the growth in Germany's LEI is accelerating, increasing sharply by 0.7% in August, following increases of 1.1% in July and 0.5% in June.  According to the Conference Board, "Between February and August 2010, the leading economic index increased 7.3 percent (about a 15.1 percent annual rate), faster than the increase of 3.1 percent (about a 6.4 percent annual rate) during the previous six-month period. In addition, the strengths among the leading indicators have remained widespread in recent months."

Overall, 10 of the the 11 Conference Board LEIs are showing increases in either August or September, with the only exception being Korea (see chart below).  The overall economic picture in both the U.S. and globally continues to remain bright. 



2 Comments:

At 10/24/2010 9:50 AM, Blogger Realist Theorist said...

This comment has been removed by the author.

 
At 10/24/2010 9:52 AM, Blogger Realist Theorist said...

If one looks at how all the "curves" have moved, this recession has been both wide and deep, yet things do appear to have bottomed.

A straight extrapolation (based on post WW-2 recessions) would show that unemployment will be around 6% when Obama comes up for re-election.

OTOH, if one agrees with those (like partially-Keynesian Nomura economist Koo, or Austrians like Marc Faber, or even mainstream folk like Reinhart & Rogoff) who think this recession is qualitatively different, then ... one can easily see the current upward trend going till the end of next year, to sputter as QE2 ends and to be followed by a double-dip sometime in 2012.

 

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