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Conference Board Leading Economic Index: A Slight Rise In May

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    June 21, 2013

    The June Conference Board Leading Economic Index(LEI) for May was released this morning. The index rose 0.1 percent to 95.2 from an upward revision for the previous month to 95.1 (2004 = 100). TheInvesting.com forecast was for a higher 0.2 percent increase. Today’s press release offers the view that “conditions in the economy remain resilient.”

    Here first is an overview of today’s release from the LEI technical notes:

     

     

    The Conference Board LEI for the U.S. rose slightly in May. Only the financial indicators contributed positively to the index, offsetting negative contributions from the ISM® new orders index, building permits and initial unemployment claims (inverted). In the six-month period ending May 2013, the leading economic index increased 1.9 percent (about a 3.9 percent annual rate), much faster than the growth of 0.1 percent (about a 0.2 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators have remained widespread.   [Full notes in PDF format]

     

    Here is a chart of the LEI series with documented recessions as identified by the NBER.

    And here is a closer look at this indicator since 2000. We can more readily see that the recovery from the 2000 trough weakened in 2012 but began trending higher in the latter part of the year.

    For a more details on the latest data, here is an excerpt from the press release:

     

    Says Ataman Ozyildirim, economist at The Conference Board: “Despite month-to-month volatility, the LEI’s six-month growth rate remains steady, suggesting that conditions in the economy remain resilient. Widespread gains in the leading indicators over the last six months suggest there is some upside potential for economic activity in the second half of the year.”Says Ken Goldstein, economist at The Conference Board: “Growth will depend on continued improvement in the housing market and an easing of consumer and business caution which would allow overall consumption and investment to gain traction. Cutbacks in public spending programs and the drag from foreign trade remain headwinds.”

     

    For a better understanding of the relationship between the LEI and recessions, the next chart shows the percentage off the previous peak for the index and the number of months between the previous peak and official recessions.

    Here is a look at the rate of change, which gives a closer look at behavior of the index in relation to recessions.

    And finally, here is the same snapshot, zoomed in to the data since 2000.

    Check back next month for an updated analysis.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.

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