The Index of Leading Economic Indicators increased 0.1% in May, the Conference Board announced Thursday. (pdf)
Economists surveyed by Bloomberg News had expected the May index to remain unchanged in May. The index increased 0.1% in April and was unchanged in March.
The leading index has risen for the past two months, following a steady decline that began in the middle of last year, the board said. However, the number of components that are falling continues to be greater than the number of components that are rising over the past six months.
In May, the index's positive contributors were: the interest rate spread, stock prices, manufacturers' new orders for consumer goods and materials, and manufacturers' new orders for non-defense capital goods. The negative contributors were: real money supply, index of consumer expectations, building permits, index of supplier deliveries (vendor performance), and average weekly initial claims for unemployment.
U.S.: Between recession and slow growth
Economist Glen Langan told BloggingStocks Thursday the May LEI information is yet another datapoint indicating an anemic-growth U.S. economy that's in he twilight zone between recession and slow growth.
"The LEI has risen for two months, but it's the slightest of rises. It's another indicator of our slow-growth economy, but really, that's just bookkeeping. As a practical matter, economic conditions are deteriorating and even if GDP technically remains slightly positive in the second quarter, the economy's still not creating the earnings growth and job growth essential for economic health," Langan said. "We need much stronger demand from businesses and consumers to get all metrics moving in the right direction again."
The leading index now stands at 102.1 (Base year is 2004 = 100). During the six-month span through May, the leading index decreased 0.7%, with three out of ten components advancing.
The index of leading economics indicators is designed to forecast turning points in the economy - - recessions and recoveries. However, economists and analysts note that the index has a better track record of predicting the general direction of the economy over the next 3-6 months.
Reader Comments (Page 1 of 1)
6-19-2008 @ 1:56PM
william lindblad said...
It's a false reading brought on by numerous factors that go unnoticed by economists. They tend to review statistics, not reality. Exports remain strong and will do so for another few months - until they are caught up in the turmoil of credit and fuel. The consumer spent the rebate checks and suppliers and retailers took advantage of this one shot boost. Suppliers, mostly in the frozen food lines, are clearing inventory in anticipation of higher electric cost. This foodstuff is held in large distribution warehouses, but they can be sectioned off which will reduce cost. All are seeking active ways to reduce either real or anticipated cost which means facility reduction and of course, layoffs. Count on everything to steadily deteriorate as the countries that have been subsidizing fuel are now passing costs to their consumer. Inflation is a world wide concern and it is on the rise. The weather and floods in the U.S. grain belt will only create futher pressure. Expect at least a 20% decrease in the DOW by years end and housing prices and credit to remain problems.
Maybe things will start to look better in the 1st quarter of 09 - and that's optimistic