Thursday, January 20, 2011

Leading Index: Economy Is Gaining Momentum


The Conference Board reported today another sharp increase in its Leading Economic Index (LEI) for the month of December, as the index rose to the highest-ever level of 112.4 last month (see chart above).  The December gain of 1% follows a 1.1% improvement in November, a 0.4% increase in October and a 0.55% gain in September.  From the cyclical low of 97.9 in March 2009, the Leading Index has improved by 13.5 points.  Here's more:

Ataman Ozyildirim, economist at The Conference Board said: “While the LEI points to an economic expansion that is gaining further traction, its components still suggest the expansion path may be uneven. December’s gain was led by housing permits, the interest rate spread, initial claims for unemployment insurance and consumer expectations. The large increases in December and November show that, after a brief pause in the second quarter of 2010, the LEI is resuming the upward trend that began in March 2009.”

Says Ken Goldstein, economist at The Conference Board: “The four-month rise suggests the economy now has some wind in its sails; however, it still faces some strong headwinds in the medium-term. Overall economic activity is likely to continue to gain momentum in 2011.”

15 Comments:

At 1/20/2011 12:54 PM, Blogger Benjamin said...

Die recession, die, die, die.

I see a long secular boom ahead. Inflation id very low, even dead, and business is picking up all around.

With open borders, goods, services, labor and capital flow into the USA whenever there is demand--ergo, dampened inflation. Demand means growth and profits.

Pout it on, Bernanke, pour it on. Pulls out the corks, tip over the barrels, set the damn house on fire.

Let it rip, baby. We're going to need a lot of fuel for the lng run ahead.

 
At 1/20/2011 1:05 PM, Blogger PeakTrader said...

After a lot of activity spinning the economy's wheels over the past two years, China won't (or really can't) give us a tow.

 
At 1/20/2011 1:15 PM, Blogger PeakTrader said...

Obama seems to believe a moped with a lawnmower engine can pull a Cadillac SUV out of the mud.

 
At 1/20/2011 1:47 PM, Blogger Ron H. said...

With open borders, goods, services, labor and capital flow into the USA whenever there is demand--ergo, dampened inflation. Demand means growth and profits.

Actually, Benji, increased demand means higher prices, which equals inflation if the money supply is increased.

Where did you study economics? The reason I ask, is that I want to discourage people from enrolling there, particularly my grandkids.

 
At 1/20/2011 2:18 PM, Blogger morganovich said...

ron-

what has led you to believe that benji has studied economics?

 
At 1/20/2011 2:39 PM, Blogger Ron H. said...

morganovich-

You're right, of course, assuming that benji has studied economics is a stretch. I just want to be sure, so that if he actually has, and if his comments reflect what he learned, I can caution others against wasting their time and money.

 
At 1/20/2011 3:44 PM, Blogger Benjamin said...

Ron H. et al-

If you knew your Milton Friedman, you would know monetary stimulus first leads to growth, then inflation, when capacity is reached.

But the USA is a special case right now. We import huge flow of everything--capital, labor, services goods. When our demand rises, the flows kick in, thus dampening inflation. In other words, our capacity increases in good times, thus raising the bar for inflation. This should not strike you as a strange statement.

Did you not wonder why even with healthy demand, the USA experienced little inflation from 1990 through 2008, when it actually then tipped into deflation?

I do not have a degree in economics, but studied at Berkeley and UT. My masters at UT was on federal policies to limit inflation. Typed on a typewriter, under gaslamps.

Okay, I made that up about gaslamps, but the rest is true. I was a financial reporter for 20 years. Now I make furniture, cabinets. And fish for carp, just to sass Juandos.

BTW, what I say would be true regardless of whether I was a prisoner at Sing-Sing or an AEI scholar.

 
At 1/20/2011 4:22 PM, Blogger Paul said...

Benji,

If you knew your Milton Friedman you would know his most famous quip is, "There's no such thing as a free lunch."

 
At 1/20/2011 4:43 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 1/20/2011 4:47 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 1/20/2011 4:48 PM, Blogger Ron H. said...

Benji,

I do know my Milton Friedman, and you either need to study some of his work after 1950, or else you are confusing him with JM Keynes.

In no world I know of does higher demand cause lower prices or lower inflation. This has nothing to do with MF or anyone else, but is simply the very basis of economics; supply and demand, and how rational actors behave when those change. I understand some of your confusion if you studied at the University of The Peoples Republic of Berkley.

So, If you had to name the one most important thing you learned from your schooling in Federal Policies to Limit Inflation, (who even knew there WAS such a program), it was that the Fed should crank up the printing presses? Amazing! Did you spend your own money to learn this, or was it on the taxpayers dime?

You said: - "Did you not wonder why even with healthy demand, the USA experienced little inflation from 1990 through 2008, when it actually then tipped into deflation?"

Check this out. You can see that during that period, prices either nearly doubled, or did double depending on the method used. Notice that CPI (do we trust that method?) indicates one of the lowest rates.

What possible reason can you think of that prices should be made to increase over time? We should expect most to drop due to constant improvements in technology and productivity driven by competition. Don't worry, I won't make you work at this, I will provide the answer. It is that your buddies at the Fed constantly run those printing presses.

And, NO, Benji, like almost everything else, you have it exactly backwards: What you say would be WRONG regardless of whether you were a prisoner at Sing-Sing or an AEI scholar.

 
At 1/20/2011 7:00 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 1/21/2011 9:26 PM, Blogger Benjamin said...

Ron H-

Over nearly 20 years, prices doubled? So what?
The point is we had strong growth, and the inflation was unimportant.

The end is not stable prices; the end is solid economic growth.

Japan has had price stability for 20 years. Good-bye Japan, as they are expected to have another eight years of deflation, possible recession, and shrinking population.

I want growth a whole lot more than perfect price stability.

Yeah, I knew the Berkeley angle would give you a boner.

 
At 1/22/2011 1:40 AM, Blogger Job said...

This is amazing list like the previous one..
Thank you for this post..
Interview Questions

 
At 1/22/2011 1:57 PM, Blogger Ron H. said...

Benji

"Over nearly 20 years, prices doubled? So what? The point is we had strong growth, and the inflation was unimportant."

...unless you've been setting aside money in a savings account, or unless you retired and now realize your income is 1/2 of what it used to be, among other things.

"The end is not stable prices; the end is solid economic growth."

Economic growth depends on some measure of predictability and optimism about the future.

"I want growth a whole lot more than perfect price stability."

As always, ignoring all evidence to the contrary, you continue to insist that inflation equals growth.

If 3% inflation is good, isn't 6% better? How about 12%? In your view, at what level does inflation become a problem, if ever?

Putting more dollars in people's hands to make them think they're richer doesn't fool everybody, and it doesn't fool anybody for very long. What can you do when they catch on? Do you keep increasing the rate of inflation to keep the trick going?

 

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