Sunday, June 13, 2010

OECD Leading Index Hits 31-Year High in April

The OECD released data on Friday showing that its Composite Leading Indicator Index for 28 member countries reached a 31-year high in April (see chart above, data here). Having increased now for 14 consecutive months starting in March of last year, the OECD Composite Leading Indicators reached 104.0 in April of this year, the highest reading since March 1979, 31 years ago.

Although there were monthly declines reported for one non-OECD country (China) and small monthly declines in seven OECD members (France, Greece,  Hungary, Italy, Korea, New Zealand and Norway), there were increases in the other 21 OECD countries (including the U.S.), the Euro area as a group, the G7 countries, NAFTA members, OECD-Europe, and the non-OECD countries Brazil, India, Russia, Indonesia and South Africa.

Overall, this is a positive report for the OECD Leading Indicators in April, and further strengthens the case that the V-shaped economic recovery currently underway around the world will continue into the future.


At 6/13/2010 12:27 PM, Blogger Bill said...

Can you comment on the ECRI index, which continues to drop? I thought this was a favorite of yours early in the recovery.

At 6/13/2010 1:38 PM, Blogger PeakTrader said...

The OECD Leading Indicators news also states:

"Tentative signs of a potential peak have appeared in Brazil with stronger evidence emerging in France, Italy, and especially China. The CLIs for Japan, the United States and Germany continue to indicate that the ongoing expansion in activity is likely to be maintained, but possibly at a slower pace."

ECRI: Expansion To Slow, A Lot

The Economic Cycle Research Institute's index of leading U.S. indicators fell 0.8 point in the week ended June 4 to 123.2., the lowest since July '09...indicating a "significant slowing" in U.S. economic growth in the months ahead.

My comment: Real growth of 3% this year will barely lower the 9.7% unemployment rate by year end.

At 6/13/2010 2:15 PM, Blogger PeakTrader said...

A real V-recovery:

"After the last severe recession in the early 1980s, GDP grew at rates of 7 to 9 percent for five straight quarters and the unemployment rate dropped from 10.8 to 7.2 percent in 18 months."

Obama should emulate Reagan
April 26th, 2009

"When Reagan entered office the U.S. inflation rate stood at 11.83 percent compared to .01 percent today. Also, in 1982 the unemployment rate stood at 10.8 percent and today is at 7.6 percent.

Reagan would implement bold policies including large, across-the-board tax cuts, to stimulate the economy and to provide incentives for saving, investment, entrepreneurship and work. The second component of the plan was deregulation to remove unnecessary costs on the economy.

During Reagan’s presidency the federal income taxes were lowered 25 percent across the board in three years with the signing of the Economic Recovery Tax Act of 1981. The Gross Domestic Product growth recovered strongly after the 1982 recession and during Reagan’s eight years grew at a rate of 3.4 percent per year.

Another component of Reagan’s plan was the control over government spending. In 1981, Reagan forced through Congress budget cuts of 5 percent which saved $150 billion in today’s dollars. In constant dollars, the nonmilitary defense discretionary spending never returned to its normalcy of 1981.

Sixteen million new jobs were created during the Reagan presidency, while inflation decreased significantly from 13.2 percent in 1980 to 6.2 percent in 1982 and cut in half again in 1983.

Reagan was also from Illinois. But that’s the only similarity it appears between the two."

At 6/13/2010 2:33 PM, Anonymous Anonymous said...

The ECRI WLI has never fallen percentage wise so far, so fast in its 41 year existence.

The Index is flashing red; it is negative year over year.

During Reagan’s presidency the federal income taxes were lowered 25 percent across the board in three years with the signing of the Economic Recovery Tax Act of 1981.

Your facts seem misplaced by half.

At 6/13/2010 2:43 PM, Anonymous morganovich said...

one of the key inputs in this index is stock market performance.

want to bet it looks worse in may?

At 6/13/2010 3:32 PM, Blogger PeakTrader said...

Anon, Reagan wanted a 30% tax cut over the first three years. However, he negotiated a 25% tax cut with the Democrat House led by Speaker Tip O'Neill (who was Speaker from 1977-87).

Reagan did raise taxes after the V-shaped recovery took hold, which is the best time to raise taxes, i.e. when an economic boom is underway.

Most economists today believe we should raise taxes and cut spending. However, that may cause a double-dip recession. To spur growth, we need to cut taxes and cut spending instead.

At 6/13/2010 4:18 PM, Anonymous grant said...

Embalmer is a hopeless failed president because he leads a single minded incompetent impotent democrat government in the house reincarnated from the Jimmy Carter era of ball less government.
Embalmer should be replaced for his inability to relate to issues and to take control of them.
To be president requires more than big talk on the issues it requires big action.
Reagan took action Embalmer is a dead body in the role.
The only thing that will fix the US economy is the next election or embalmer resigns.

At 6/13/2010 4:30 PM, Anonymous grant said...

Creating money in the stock market is not the desired outcome at this point in time in this recovery.
If the amateur idiots could control their stupidity and not react to false imagined crises like the Euro-USD relationship, and European debt crisis,[that plays into the hands of the central planners for another hit on the markets]it would be a great start to slow and steady asset inflation over the long term.

At 6/13/2010 7:16 PM, Blogger PeakTrader said...

The spending spree continues:

Obama Appeals to Congress for $50 Billion in Emergency Aid
June 13, 2010

President Obama is pressing Congress to approve emergency aid money to support economic recovery and help avoid widespread layoffs of public workers, the Washington Post reported Saturday.

Congressional leaders received a letter from the president asking for almost $50 billion for distribution to state and local governments, saying that increased spending is “urgent and unavoidable,” the Post reported. The money would protect the jobs of teachers, police and firefighters.

“Because the urgency is high—many school districts, cities and states are already being forced to make these layoffs,” Obama wrote, “these provisions must be passed as quickly as possible.”

So far this fiscal year, the federal government has spent $935.61 billion more than it took in, with four months left to go. The U.S. ran a record $1.42 trillion deficit in fiscal year 2009, which began Oct. 1, 2008.

At 6/13/2010 7:20 PM, Blogger Ron H. said...

"Creating money in the stock market is not the desired outcome at this point in time in this recovery."

grant, perhaps you are just using the wrong terms, but money is not created in the stock market. It is created by the Federal reserve through the banking system.

If you really meant "wealth" instead of "money", then although closer, that is not exactly correct either. The companies whose stocks are traded in the stock market create wealth, and you may share in that wealth as part owner of a company if you guess correctly, but no money or wealth is created in the market itself.

"it would be a great start to slow and steady asset inflation over the long term."

Again, you may not really want to use the term "inflation. Are you actually hoping for an asset bubble as in the stock market bubble of the late 1990s or the more recent housing bubble?

At 6/13/2010 7:32 PM, Blogger PeakTrader said...

Obama steps up push for added economic stimulus
Jun 13, 2010

The U.S. deficit reached $1.4 trillion in 2009 and the White House projects will hit $1.6 trillion in 2010.

House of Representatives Majority Leader Steny Hoyer: "I think it's accurate that there's spending fatigue, not only on Capitol Hill, but around the country."

Obama warned that without additional aid, states could be forced to enact "massive layoffs" of teachers, firefighters and other employees.

At 6/13/2010 8:03 PM, Anonymous grant said...

What is also needed is to get party politics out of government. The Democrats and Republicans should act like big men,Get together to get rid of legislation and regulation[or modify it]where it impedes economic growth.
If the time where the intended outcome of legislation has passed why not repeal it or modify it so it serves the current eras needs without impedeing them.

At 6/13/2010 8:12 PM, Anonymous grant said...

OK! Ron points taken,but when wealth is monetarised it is the same outcome.It becomes money therefore can or will be inflationary.

At 6/13/2010 9:00 PM, Blogger Ron H. said...

"...but when wealth is monetarised it is the same outcome.It becomes money therefore can or will be inflationary."

grant, Do you mean monetized? I've never heard of monetizing wealth, only debt.

If you mean trading wealth in the form of an asset for money, then that is not in itself inflationary. The money and asset already exist, and are only changing hands. Inflation requires an increase in the money supply.

At 6/13/2010 9:15 PM, Anonymous grant said...

The declining military and leadership role of the bankrupt debt ridden British Empire after the second world war inspired Harry Truman to massively increase Americas defense spending.The result was to project the country into the role of super power and world wide policeman after the outbreak of the Korean war.
This resulted in the huge worldwide US.military buildup since. In my opinion it has resulted in a more peaceful world of un-precedented economic expansion and growth even though there has been temporary setbacks through misadventures, sometimes incompetence, and wars I think the outcome has been overall positive for everyone everywhere.
Ronald Regan massively increased defense research & development spending to counter the raving soviet era war mongering loonie Breznev
The result was the star wars program with the resultant new equipment spending on:, the F15 eagle,m1a1 Abrahams tank,the Aegis Cruisers,the Cruise missile,B1 bomber,etc that totally modernized the US. military.
The outcome of the Desert Storm war under George Bush senior would have been much more questionable without Ronald Regans foresight.

At 6/13/2010 9:19 PM, Anonymous grant said...

The created inflation is within the asset realization price growth.

At 6/13/2010 10:32 PM, Blogger Ron H. said...

"The created inflation is within the asset realization price growth."

Are you making this up as you go, or are you using some really bad language translation software?

At 6/14/2010 1:27 AM, Anonymous grant said...

What I am saying is correct.

At 6/14/2010 3:21 AM, Blogger Ron H. said...

Grant, what you are saying is a meaningless string of words. Maybe you think you are being cute here, but you are embarrassing yourself.

If you are going to make comments an an economics blog, you really need to learn some economics. Here's a good place to start. Otherwise, people will continue to laugh at you.

At 6/14/2010 3:53 AM, Anonymous grant said...

I can't see or hear anyone laughing or critising except you in your usual manner of picking very small issues and making mountains out of them.
Obviously your understanding of the issue is limited.
Take a look at morganovich previous post to mine.
Maybe then you will see it.discussion ended.

At 6/14/2010 8:24 AM, Anonymous morganovich said...


you are missing my point. my point is that the OECD index uses stock market levels as an input to derive it's levels. nearly all the leading indicators indexes do.

thus a big stock market rally begets a big spike in LI index.

however, this also works ion reverse. when the market tanks like it did in may, the LI indexes tank with it.

At 6/14/2010 12:25 PM, Blogger Ron H. said...

grant, based on new information, is there anything about your previous response you would care to reword?

At 6/14/2010 4:09 PM, Anonymous grant said...

Heres a recent statement made by Ben Benankle [I think reporting to the house].
"Unless we as a nation make a strong commitment to fiscal responsibility in the longer run,we will have neither financial stability or healthy economic growth"

Thanks for your answer Morganovich

At 6/14/2010 8:31 PM, Anonymous Anonymous said...

Great! We're back at the '79 level!

Theo of Norway

At 6/14/2010 10:05 PM, Blogger Ron H. said...

- "Heres a recent statement made by Ben Benankle [I think reporting to the house].
"Unless we as a nation make a strong commitment to fiscal responsibility in the longer run,we will have neither financial stability or healthy economic growth""

It would be hard to find anyone who would disagree with that sentiment. Too bad he didn't come by that belief in 2008 before TARP.

At 6/15/2010 8:50 AM, Blogger juandos said...

PT says: "Most economists today believe we should raise taxes and cut spending"...

Well I've heard that line to and the first thing that comes to mind when I hear it is that the economists who say it need to GET A GRIP ON REALITY!...


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