Friday, July 22, 2011

Leading Economic Index Increases in June

Despite a lot of uncertainties and concerns about a pending economic slowdown, the Conference Board reported yesterday that its Leading Economic Index (LEI) increased again in June, as part of an upward trend in the index that started in April 2009 (see chart above).  The ongoing increases in the 10-variable composite economic forecasting index suggest that positive economic growth will continue this year, even if the rate of growth moderates, and the chances of a double-dip recession this year remain very low. 

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI continued to increase in June, but the strengths among the leading indicators have been balanced with the weaknesses in recent months. The Coincident Economic Index, a monthly measure of current economic activity, continued to increase slowly. The leading indicators point to slowly expanding economic activity in the coming months."

In recent weeks, the Conference Board has also reported strong increases in the Leading Economic Indexes for the U.K. (0.6%), Korea (0.4%) and China (0.5%), all for the month of May.  

37 Comments:

At 7/22/2011 10:59 AM, Blogger Benjamin said...

I hope this is right

Ray Dalio, America's biggest hedge fund manager, says that it will take 10 years for Americans to deleverage enough to get the economy going again.

Dalio hints there is a faster way--print enough money to induce mild inflation, which will help us deleverage. and help banks (with underwater properties on their books).

Dalio says that certain European nations lack that option, such as Greece, as they are tied to the euro. They will go into perma-recession.

So I ask Carpe Diem readers: Is your love of zero inflation so carnal, that you will will forgo 10 years of sex (that being economic growth)?

 
At 7/22/2011 11:19 AM, Blogger morganovich said...

so, this thing goes up every month, while every real indicator (gdp, employment, retail sales, manufacturing surveys) keeps dropping.

sorry, but this is a nonsense indicator.

it's massively susceptible to confusing monetary debasement with a promising economy.

bunny-

we already have a ton of inflation. it's what's killing us.

there is ZERO evidence that you can drive real growth by printing money. QE2 had the opposite effect.

destroying the savings of the prudent and productive to bail out the profligate is an even worse plan than taxing the successful to pay the indolent.

you really need to get a basic economics education.

ultra loose money is hampering recovery, not helping it.

CPI is already 8%. you'll trot out that idiot boskin report, written by political hacks and failing to contain any actual evidence, but it'll just make you look foolish again.

look at the prices of imports and exports. you're looking at double digit inflation there according to our trade statistics.

we export wheat, but also consume it here. we import cars, but make them here. add up the trade component and the domestic component of these goods, and you're at 1/3+ of the economy. that piece alone will drive 4%+ inflation if every other price in the US were flat, which is nothing like true.

there is no credible case for zero inflation.

not even the heavily adulterated CPI is reading low any more. even it ran 3.6% year on year in june.

that's almost double our target and climbing rapidly. (and not even half the real number)

sorry bunny, but there is literally ZERO data on you side, even from the BLS.

inflation is well above target and rising.

QE has failed to stimulate anything but federal debt and the fed balance sheet. twice.

you repeat this "print your way to prosperity" mantra endlessly, but it's as wrong an idea now as it was when you started blabbering about it years ago.

 
At 7/22/2011 11:22 AM, Blogger morganovich said...

ps-

dalio is a huge holder of gold and is just hyping his book.

he clearly already believes inflation and dollar debasement are here and likely to persist.

his big theme has been dump dollars and buy gold and commodities.

as ever, you have no idea what the people you quote are talking about and why.

 
At 7/22/2011 11:38 AM, Blogger Paul said...

Benji,

"So I ask Carpe Diem readers: Is your love of zero inflation so carnal, that you will will forgo 10 years of sex (that being economic growth)?"

I am embarrassed for you after reading that. Did you think that a witty metaphor?

Anyway, all the Monopoly money in the world isn't going to paper over the aftermath of your boyfriend's wrecking ball.

 
At 7/22/2011 11:51 AM, Blogger James said...

California Rules – Taxes/Regulation Do Not Kill Jobs!

While the nation added only 18,000 jobs in June high tax, high regulation California added 28,800.

 
At 7/22/2011 11:55 AM, Blogger Benjamin said...

Consider this document from the Hong Kong Monetary Authority:

http://www.info.gov.hk/hkma/eng/research/cei/2010/CEI_201001.pdf

It is a study of mainland China’s monetary policy. It concludes:

“Our estimated monetary reaction functions for the PBoC’s show that the
key factors of monetary policy are economic growth and inflation, which are in fact the PBoC’s stated mandate. Of the two main policy objectives, the PBoC appears to react more strongly to deviations of growth from targets.”

Okay, so the Hong Kong Monetary Authority says that mainland China tilts towards growth with their monetary policy. And let’s look at Japan: We know the Bank of Japan puts inflation-fighting first.

And what has been the result? How have the two nations fared in the last 20 years?

Answer: China has boomed, while Japan is shriveling.

This is the argument we need to bring to the public. This is the insight we need at this time.

I will re-phrase the question (so Paul's ears do not burn):

Is your ascetic, platonic love of self-denial and low inflation so intense, that you are willing to do without the carnal joys of economic growth for 10 years?

You want the American economy to rot for 10 years just to keep inflation low?

BTW, Morgan Frank's collection of cranks and crackpot stats do not reflect the real world. The core CPI for the last 12 months is 1.6 percent. And that may overstate the case.

 
At 7/22/2011 12:22 PM, Blogger Buddy R Pacifico said...

One of the ten components of the Conference Board Index is Money Supply, M2. I wonder if the recent surge in M2 is helping push the index higher?

Scott Grannis has posted a money supply growth alert. M2 normally grows about $10 billion dollars a week but lately has been growing at about $80 billion a week!

BTW, go to the link cited and check out the first comment for some humor.

 
At 7/22/2011 12:28 PM, Blogger Paul said...

This comment has been removed by the author.

 
At 7/22/2011 12:32 PM, Blogger Rufus II said...

This week it came in around $6 Billion, didn't it?

 
At 7/22/2011 12:33 PM, Blogger Paul said...

Benji,

"You want the American economy to rot for 10 years just to keep inflation low?"

It's a nonsense question. The best way to get the economy growing is to kick your boyfriend's socialist ass to the curb in 2012. By the way, the Democrats in the Senate just voted down the "Cut, Cap, and Balance" bill on a party line vote so your boyfriend didn't have to veto it. Shall we blame the Tea Party for this, Benji boy?

"BTW, Morgan Frank's collection of cranks and crackpot stats do not reflect the real world."

Why do you persist with your doomed throw downs with a gangsta' like Morganovich? He sends you running home to mama with a mouth full of dirt and your underwear pulled clean up over your head every time you do it.

 
At 7/22/2011 12:35 PM, Blogger Rufus II said...

$6.5 Billion

 
At 7/22/2011 12:38 PM, Blogger Rufus II said...

Well, LEI be damned, GDP will be lucky to crack 1% in the 2nd qtr, and will likely be negative this qtr. I'd bet the ranch on a negive read Oct - Dec.

 
At 7/22/2011 1:07 PM, Blogger morganovich said...

benji-

once more, you have misunderstood what you are reading.

that does NOT say that monetary policy causes growth. it says that their monetary policy is being designed to go with their growth.

i've already proven to you about a dozen times that japans problems were NOT monetary. that math is irrefuatble. their growth has had no correlation to money supply or interest rates since the 80's.

again, you trot out a bunch of misunderstood quotes and display your total lack of a basic economic grounding and inability to stop making debunked claims over and over.

you have a memory like an etch a sketch.

 
At 7/22/2011 1:12 PM, Blogger morganovich said...

bunny-

"core" only matters if you don't eat, drive, fly, or use electricity.

it's a BS measure created by inflation apologists.

there is ZERO evidence that CPI is too low. you are just falling for the same political whitewash clinton used to rein in entitlement growth.

CPI no longer has anything to do with the price level. it's a political lie created for budget purposes.

so you tell me oh genius of the bar stools, how can imports and exports be up double digits in price while the economy as a whole shows low inflation?

and don't say "housing". you know damn well that home prices only effect the few that buy in a given year and move owner equivalent rents very little (and that rents have been spiking for 2 years). housing didn't drive inflation in 2007, it's not going to drive disinflation now.

 
At 7/22/2011 1:31 PM, Blogger juandos said...

Hey Paul thanks for that Weekly Standard link, its a good one!

 
At 7/22/2011 1:43 PM, Blogger Benjamin said...

inflation is dead. We need a sustained round of moderate inflation, or so says Ray Dalio.

I suspect Morgan Franks hedge fund is a little smaller than Dalios. Just a guess.

BTW, Dalio estimated future gold prices by the global money supply stock--and remember, the indians and Chinese have been aggressively growing their economies and their money supplies.

They do not have anal little bean counter central bankers, talking in hushed tones about gold, in those two nations. They are pursuing economic growth.

The future is in Asia.

 
At 7/22/2011 1:58 PM, Blogger morganovich said...

bunny-

you misquote and misunderstand dalio even worse that you do friedman, then you hide behind appeal to authority.

david eihnorn at greenlight believes inflation is already rife and getting worse. he has a whole fund backed with gold, not dollars. he's also got a much better track record than dalio.

if you're going to appeal to authority, at least pick a good one.

and then do try to understand what he's saying. dlaio's whole fund is positioned to benefit from inflation. it has already been doing so for some time.

he's notorious for "talking his book". he doen't care at all that the economy needs, he wants to see RAMPANT inflation because that will make him the most money.

stick to bar stools buddy. this finance game is clearly too complex for you.

finaly, if size of investment portfolio and how much profit you have made is the key to credibility (as you argue), then you have no business at all arguing with me.

once more, your arguments prove self refuting.

what a shock...

 
At 7/22/2011 1:59 PM, Blogger Paul said...

Like I said, Benji, every single time.

 
At 7/22/2011 2:21 PM, Blogger Rufus II said...

Well, with unemployment 9.2%, and Rising, it's hard to make a case for rampant inflation in the near future.

The much more interesting observation, to me, is oil/gasoline prices "rising" as the U.S. economy "Slows."

 
At 7/22/2011 2:30 PM, Blogger morganovich said...

"Well, with unemployment 9.2%, and Rising, it's hard to make a case for rampant inflation in the near future."

no it's not.

imports/exports are up double digits. commodities are soaring. the dollar is tanking. money supply is way up. real interest rates are significantly negative. (more than -3% in the US)

monetary policy is looser than benji's grasp on reality.

you are acting as though phiilps curve is valid. it's not. since ww2, it's been pretty much irrelevant.

it's easy to get high inflation with high unemployment.

look at the 70's.

 
At 7/22/2011 2:30 PM, Blogger juandos said...

This is the 15th week in a row where unemployment claims have been above the 400,000 level...

Well if that's a factual statement then the leading indicators from the Conference Board are about useless...

 
At 7/22/2011 2:50 PM, Blogger Rufus II said...

Look, a loaf of bread is, depending on this, and that, about $2.00. The "Wheat" content has gone from, maybe $0.07 to $0.09.

That means: as the Commodity, "wheat," increased 28%, the finished product increased 1%.

Corn is up close to 100% over the last couple of years, but a bottle of Sam's Cola is still $0.69 for a 2 liter.

I made Chili, yesterday, the chili beans (store brand - just as good as Bush's Hot Chili Beans) were approx the same price I paid back in the '70's.

The eggs were $1.69/doz. Again, not much more than I paid back then - maybe 20% in 40 years.

The Seventies were a special case. A lot of things were going on then that aren't going on now.

My first PC was a Zenith, and cost about $3,000.00. Impossible to compare that clunky, old thing with the $328.00 Laptop I'm typing this on.

The 3 yr. old car I'm driving today is Way, and Beyond the best vehicle I've ever owned, and way the cheapest (in Real dollars.)

Inflation, and comparing Anything to the seventies gets tricky.

 
At 7/22/2011 3:03 PM, Blogger Rufus II said...

And, if you'd clicked on my link you would have seen that Money Supply this week was $6.5 Billion, a touch below the long term average of about $10 Billion.

 
At 7/22/2011 3:13 PM, Blogger Rufus II said...

The one indicator that is a 100% predictor of impending recession is when the unemployment rate goes up by 0.5% (regardless of the number of months, required to accomplish this.) We're Now up 0.4%. This month will, likely, put us up to 0.5%.

The second, virtually certain, indicator is a very large rise in the cost of gasoline. We've, basically, doubled since the 2009 low.

We're toast.

 
At 7/22/2011 3:14 PM, Blogger morganovich said...

rufus-

oil is up. look at gas.

gold is up, look at jewelry.

steel, copper, nickel, look at batteries or cars.

steers, way up, so is beef, ditto pigs etc.

you are cherry picking.

the price of food in general is WAY up.

even the BLS food at home inflation is 4.7%, and that's with geometric weighting. it would be up a great deal more if you kept the grocery cart constant. (likely more like 9-10%).

then you say this:

"The Seventies were a special case. A lot of things were going on then that aren't going on now."

like what?

now is a special case too. there has NEVER been money this loose. when were real interest rates in the US even -3.35%?

us money supply growth is over 5% (m2) and over 13% (m1).

with GDP growth of 1.6%, that's going to be inflationary, especially as the bolus of 10% m2 grwoth and 15% m3 growth from a couple years ago is still working it's way into the economy.

if money supply growth could consistently outpace GDP growth by 1200 basis points for 6 years and not spark high inflation, well, that would be a special case indeed.

but it has not happened.

the BLS is simply understating the number for political reasons.

 
At 7/22/2011 3:27 PM, Blogger Mike said...

This has been one of the funniest comments section I've read in a while.

I will be courteous enough to tell you, Morganovich, that I will be stealing this line :"you have a memory like an etch a sketch"... and cannot wait for the first opportunity to use it.

 
At 7/22/2011 3:39 PM, Blogger Rufus II said...

1971 Nixon took us off the Gold Standard, and, some would say, put us on the "oil standard."

Then, he institutes "Price Controls," which builds up a tremendous inflationary pressure. Of course, we were much more highly "unionized" back then, which caused wage/price spirals to really, really "Spiral."

There was tremendous Demand for American products from a world that hadn't fully recovered from WWII.

Then, there were the oil shocks.

You are correct when you say, all periods are different. And, the seventies, and the "tweens" were/are really different.

And, btw, Benny's right about one thing. Inflation is the Savior of the Fiat Currency. That's the reason for having such a thing.

 
At 7/22/2011 3:49 PM, Blogger Buddy R Pacifico said...

Rufus, yes M2 was a little bewlow average for the last reporting week at $6 billion. The previous two weeks amounted to a growth of $165 billion or $145 billion over average M2 grwoth.

Here is a chart that shows the recent spike in money growth and the averages over the last decade.

 
At 7/22/2011 3:50 PM, Blogger Rufus II said...

Let me Summarize; The Seventies was the U.S., and World, Financial Systems getting used to floating currencies.

 
At 7/22/2011 3:54 PM, Blogger Rufus II said...

Yeah, Buddy, I clicked on your previous link. Did you notice when the other two spikes took place? Uh, huh, right at the beginning (you might say the "Oh S**t, moment") of the recessions.

 
At 7/22/2011 4:15 PM, Blogger Benjamin said...

Inflation is deader than Vincent Foster.

 
At 7/22/2011 4:30 PM, Blogger PeakTrader said...

The LEI doesn't predict taxes will rise, while government services and entitlements fall, which will reduce consumption, as Americans buy fewer and smaller goods.

Moreover, recent new regulations, or overregulation, will contribute to the decline.

 
At 7/22/2011 4:36 PM, Blogger Rufus II said...

The main thing the LEI, all the politicians, and every talking head on CNBC/Fox ignores is: when the fuel cost to drive a mile gets close to $0.20 the economy Shuts Down.

And, we, for all practical purposes, are There.

 
At 7/22/2011 6:00 PM, Blogger Ron H. said...

"Why do you persist with your doomed throw downs with a gangsta' like Morganovich? He sends you running home to mama with a mouth full of dirt and your underwear pulled clean up over your head every time you do it."

**like**

 
At 7/22/2011 6:21 PM, Blogger Ron H. said...

"The main thing the LEI, all the politicians, and every talking head on CNBC/Fox ignores is: when the fuel cost to drive a mile gets close to $0.20 the economy Shuts Down."

There's a very good reason everyone ignores that number, Rufus.

 
At 7/23/2011 10:35 AM, Blogger morganovich said...

bunny-

"Inflation is deader than Vincent Foster."

no, you are just dumber than a box of hair.

 
At 7/23/2011 10:36 AM, Blogger morganovich said...

"The Seventies was the U.S., and World, Financial Systems getting used to floating currencies."

and now it is getting used to massive fiat currency debasement, negative interest rates, and outlandish federal deficits.

this one is going to be worse.

 

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