The index of leading economic indicators rose by 0.4% beating the Econoday Consensus estimate of 0.2%.
“Gains were broad-based in the month led by the ISM new orders index and including, as always, the interest rate spread where short-term rates are unusually low. The LEI has been very solid and continues to point ahead to rising economic strength.”
Useful Chart Showing Significance of LEI
Leading Economic Indicators Rise Again
The Conference Board press Release says the LEI Index Points to Continued Economic Growth Through 2017.
“The March increase and upward trend in the U.S. LEI point to continued economic growth in 2017, with perhaps an acceleration later in the year if consumer spending and investment pick up,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board
Useful Prediction
The economy will perhaps accelerate if consumer spending and investment pick up.
That’s useful information since I thought it was a given that the economy would accelerate if those things happen.
Thank you, Conference Board for this important clarification.
Leading Index Components
The above from the Conference Board Description of Components.
Bear in mind, standardization factors are not the same as weights.
While some of those indicators may actually lead something, especially at the bottom of the cycle, it is debatable if they lead anything now. Other components, notably the stock market, don’t lead anything. The stock market is a coincident measure of attitudes towards stocks.
The interest rates spread is nearly always positive except right before a recession. I would suggest, to no avail that the direction of the spread (widening or narrowing) is what’s really important.
I would also suggest housing starts, not permits are what to watch. Watching permits is sort of like watching a leading indicator to a leading indicator, but not quite. Permits are a measure of builder sentiment of expected activity and thus highly likely to be very wrong at turns.
Revisions
The above chart looks impressive but the components and weights are constantly adjusted so the curves match what happened. There was a major revision in 2011.
Note the sharp turns at the bottoms.
Soft data is far more likely to be correct at the bottom of economic cycles than the top.
Mike “Mish” Shedlock
About as useful as the IMF’s report titled: “Gaining Momentum?”
Can you really have a “cyclical recovery” when “NONE of the underlying problems that have beset the world economy since the eruption of the global financial crisis in 2008 has been resolved”?
“According to the IMF, US corporations have taken on $7.8 TRILLION in ADDITIONAL DEBT and other liabilities since 2010 and ‘corporate credit fundamentals have started to weaken, creating conditions that have historically preceded a credit cycle downturn.’”
Selected quotes from “Small uptick in growth but major downside risks remain, says IMF”
http://www.wsws.org/en/articles/2017/04/20/econ-a20.html
Mish,
Could you do a piece on Passive/ETF/Index investing sometime in future? It sure seems like the “Bogle” type set it and forget it trade is getting crowded. And, are Vanguard, Fidelity etc. all too big to fail if folks ever stampede out of these so called “No Brainer” investing patterns?
And where is the saturation point in this ETF craze? Seems like any sign of trouble could trigger a liquidity problem there.
Every week payroll checks are cut and more money withheld that goes automatically into funds, including ETFs. This is a big part of supporting the stock market. These folks are not going to be sellers. They believe that the market will always rebound because it always has. Enough will capitulate at the bottom to form the bottom.
Actually I have found the LEI to be a useful long term indicator. Adjustments occur for certain data as it must be estimated until some figures come out (just like GDP data gets adjusted), but the adjustments do not have a significant impact on the long term trends. I certainly am a lot happier to see LEI going up than down.
Reblogged this on John Barleycorn and commented:
fake number by the government again