Saturday, September 24, 2011

Leading Economic Index Increases Again in August Upward Trajectory Not Consistent With Recession

The Conference Board reported on Thursday that its Leading Economic Index (LEI) increased in August for the fourth consecutive month to its highest-ever level of 116.4 (see chart).  Starting in April 2009, the LEI has increased every month except for April of this year, for a record of 28 increases over the last 29 months.  As the graph above shows, the last six recessions have been preceded by sharp declines in the LEI, and we're not seeing any declines in the LEI that would predict a pending recession.    

As Scott Grannis commented on the Calafia Beach Pundit Blog:

"The Index of Leading Indicators continues to rise, up 6.5% over the past year. Every recession for the past 50 years has been preceded by a significant decline in the growth rate of this index; that is not the case today. To be sure, this index is not always a good leading indicator, but it is not even close to signaling impending doom or even a modest recession."

9 Comments:

At 9/24/2011 8:28 AM, OpenID American Delight said...

What is this index based on?

 
At 9/24/2011 8:30 AM, Blogger Mark J. Perry said...

Sorry, I forgot to include the link, it's there now for the Conference Board website, you'll find technical information there about the index.

 
At 9/24/2011 9:59 AM, Blogger Larry G said...

no matter what the manufacturing and other "leading" economic index "indicators" are saying... a long-term structural unemployment problem is ultimately going to be bad news for the economy.... and the budget.

the whole idea of "job creation" and "supply side" is to increase tax revenues from higher employment levels.

if you don't achieve higher levels, our debt is going to continue to grow even if we cut entitlements - because the entitlements are only about 1/2 the deficit.

there is no such thing as a "good" economy with a hollowed out workforce.

 
At 9/24/2011 10:30 AM, Blogger rjs said...

a recession implies we'd contract further from where we are, & with many metrics already near or at their lows, it'd be very unlikely...

 
At 9/24/2011 10:43 AM, Blogger Benjamin said...

I sure hope this index is meaningful anymore.

 
At 9/24/2011 11:14 AM, Blogger Buddy R Pacifico said...

It looks like the Conference Board Leading Economic Index relies a lot on Manufacturing data. Who would have thought in 2009, that Manufacturing would be leading the growth in GDP for the U.S. now?

 
At 9/24/2011 3:37 PM, Blogger juandos said...

Note the press release from the Conference Board dated 22 September, 2011: Says Ataman Ozyildirim, economist at The Conference Board: “The August increase in the U.S. LEI was driven by components measuring financial and monetary conditions which offset substantially weaker components measuring expectations. The growth trend in the LEI has moderated and positive and negative contributors to the index have been roughly balanced. The leading indicators point to rising risks and volatility, and increasing concerns about the health of the expansion.”

 
At 9/24/2011 4:22 PM, Blogger morganovich said...

from their own release:

"The August increase in the U.S. LEI was driven by components measuring financial and monetary conditions which offset substantially weaker components measuring expectations."

this index loses predictive power in periods of huge money supply growth (well in excess of nominal GDP) and when the fed plays with the yield curve.

it is contradicted by terrible performances by the regional fed indexes.

small business confidence is plummeting.

job creation is punk at best. (heavily related to small business confidence)

the combo of NY and philly fed reports are now at levels ONLY ever seen in recession.

i would not put much faith in the LEI just now.

 
At 9/25/2011 2:46 AM, Blogger juandos said...

"this index loses predictive power in periods of huge money supply growth (well in excess of nominal GDP) and when the fed plays with the yield curve"...

I was wondering about that M, glad you pointed it out...

 

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