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Fifth Straight Month Of Growth In Leading Economic Index

  • Written by Syndicated Publisher No Comments Comments
    December 20, 2013

    The Latest Conference Board Leading Economic Index (LEI) for November was released yesterday morning. The index rose to 0.8 percent to 98.3 percent from the previous month’s 97.5 (2004 = 100). Today’s number was slightly above the 0.7% increase forecasted by Investing.com.

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

     

    The Conference Board LEI for the U.S. increased for the fifth consecutive month in November. Positive contributions from the yield spread, initial claims for unemployment insurance (inverted), and ISM® new orders more than offset negative contributions from consumer expectations for business conditions and building permits. In the six-month period ending November 2013, the leading economic index increased 3.1 percent (about a 6.4 percent annual rate), faster than the growth of 2.0 percent (about a 4.1 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators have become more widespread.   [Full notes in PDF

     

    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:

    “The LEI continues on a broad-based upward trend, suggesting gradually strengthening economic conditions through early 2014,” said Ataman Ozyildirim, Economist at The Conference Board. “Improving labor markets and new orders in manufacturing, combined with strong financial indicators, drove November’s gain. However, consumers’ outlook for the economy and the drop in housing permits continue to pose risks in 2014.””November data reflect a U.S. economy that is expanding modestly, discounting some renewal in activity after the government shutdown,” said Ken Goldstein, Economist at The Conference Board. “The coincident economic index shows the economy expanding at a relatively slow pace. The trend in the leading economic index is stronger, signaling for some time that the economy is developing forward momentum, and will continue to strengthen through early 2014.”

    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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