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Chart Of The Day: LEI Leading To Lagging Ratio

  • Written by Syndicated Publisher No Comments Comments
    November 27, 2012

    While the general consensus from the media, and the majority of analysts, is that the U.S. economy will avoid a recession - there have been numerous indicators that have continued to point to deterioration in the economic fabric.  Most recently industrial production in the U.S. dropped sharply, along with capacity utilization rates, due to the growing recession in Europe, and slowdown in China, which has impacted exports from domestic manufacturers.

    This past week the monthly release of the Leading Economic Indicators showed that the leading-to-lagging indicator ratio dropped to 89.5 which matches the lowest level in more than 2 1/2 years.  Historically when the leading-to-lagging ratio has fallen below 91 the economy was either in, or about to be in, a recession.

    lei-coincident-to-lagging-112312

    While it is not popular within the media, or blogosphere, to point out economic concerns but rather why markets are going to engage in a continued bull market – the simple reality is that by the time the NBER announces an official recession it will be far to late for investors to minimize the damage.  The leading-to-lagging ratio continues to point to an economy that has very little, if any, actual momentum which leaves it very susceptible to exogenous shocks.

    So, while there are many things to be thankful for within the economy this holiday season – it will pay for investors to continue to consider both sides of the economic argument as we move into 2013.  Ignoring the trends of the macro-data could prove costly.

    Images: Flickr (licence attribution)

    About The Author

    Lance Roberts – Host of Streettalk Live

    lance robertsAfter having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; Lance has pretty much “been there and done that” at one point or another. His common sense approach has appealed to audiences for over a decade and continues to grow each and every week.

    Lance is also the Chief Editor of the X-Report, a weekly subscriber based-newsletter that is distributed nationwide. The newsletter covers economic, political and market topics as they relate to the management portfolios. A daily financial blog, audio and video’s also keep members informed of the day’s events and how it impacts your money.

    Lance’s investment strategies and knowledge have been featured on Fox 26, CNBC, Fox Business News and Fox News. He has been quoted by a litany of publications from the Wall Street Journal, Reuters, The Washington Post all the way to TheStreet.com as well as on several of the nation’s biggest financial blogs such as the Pragmatic Capitalist, Zero Hedge and Seeking Alpha.
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