The index of leading economic indicators declined 0.1% in January 2008 -- its forth consecutive monthly decline, the Conference Board announced Thursday, suggesting the U.S. economy is likely to register weak growth in the period ahead. One bright spot: the group's coincident index, which measures current conditions, rose 0.1% in January 2008, indicating that the economy wasn't in recession last month.
The Conference Board said five of the 10 components that make up the leading indicators -- stock prices, building permits, manufacturers' new orders, non-defense capital goods, and interest-rate spreads -- declined in January 2008. Real money supply, average weekly jobless claims, and consumer expectations/vendor performance increased. Average weekly manufacturing hours and manufacturers' new orders for consumer goods/materials remained the same.
Economist Steve Affinito told BloggingStocks Thursday the January report shows a U.S. economy that's barely growing.
"The January survey has very soft numbers, and when you combine that with four consecutive LEI monthly declines, it shows an economy that's inching along, basically. If we're not in recession right now, we're experiencing the closest thing to it," Affinito said. "The index has also registered its steepest 6-month decline since early 2001, and we know what happened then, a recession."
Further, Affinito said almost all of the major economic metrics are flashing danger signs for the economy. The U.S. Labor Department's 4-week moving average for new jobless claims is now above 350,000 or above a level the U.S. Federal Reserve considers a danger sign regarding lay-offs; the Philadelphia Federal Reserve Bank manufacturing survey for January 2008 unexpectedly contracted the most since February 2001 to -24 from -20.9, and job creation is almost non-existent. "Those are three compelling data points, and they all indicate we're barely growing, if that," Affinito said.
Based on the above, Affinito expects the U.S. to record negative second quarter GDP growth of -0.3 to -0.6%, adding that the challenge now for policy makers is to "keep markets liquid and functioning, stimulate business and consumer demand, and keep the recession as mild as possible."
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