From a macroeconomic standpoint, the fiscal stimulus package can't get passed soon enough. The Conference Board's index of leading economic indicators (pdf) fell 0.8% in October, with six of 10 components dragging the index lower. Economists surveyed by Bloomberg News had expected the LEI index to decline by 0.6% in October.
From April-October 2008, the leading index declined 2.4% or a negative 4.7% annual rate, compared to a 1.2% decrease or a negative 2.3% annual rate over the previous six months, the Board said.
Economist Richard Felson told BloggingStocks Thursday the October LEI data documents what many on both Main Street and Wall Street sense: economic conditions are worsening.
"The LEI data shows an economy that's slowing. The recession is getting worse, so look for more of the same regarding job lay-offs and downsizings, as well corporate revenue and earnings declines, and earnings guidance reductions," Felson said. "As it stands now, the economy is likely to remain in recession through at least end of the second quarter of 2009, which points to the need for federal fiscal stimulus, and other measures. The individual states are doing what they can to increase private sector demand, but many are cash-strapped themselves, facing budget deficits."
Stock prices were the largest negative contributor to the index; followed by building permits, index of consumer expectations, index of supplier deliveries (vendor performance), average weekly initial claims for unemployment insurance (inverted), and manufacturers' new orders for non-defense capital goods.
Three indicators rose: real money supply, interest rate spread, and manufacturers order for new goods. One indicator -- manufacturing hours -- remained steady in October.
Economic Analysis: When you combine the October 2008 LEI data with the Fed Minutes released Wednesday, it's indisputable that the contraction is worsening. Further, given the U.S.'s problems in housing, banking, construction, and manufacturing, as New York Times columnist Paul Krugman has underscored, the nation will have to and should run large budget deficits over the next two years to get the economy back on the growth track. Krugman has said the deficits may have to be as large as $1.0-1.2 trillion each year for two years, and that's the view from here, as well.
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Reader Comments (Page 1 of 1)
11-20-2008 @ 4:12PM
Carroll Stoianoff said...
We are fighting the wrong war and the wrong enemy in Iraq and Afghanistan. OPEC, including American oil, has caused more dislocation, loss, pain and suffering in America and destroyed more lives than 9/ll. The countries and companies in OPEC should be the focus of our missiles, not Afghan and Iraqui civilians. Americans are the largest oil consumers in the world -- and have been since Henry Ford put his tin lizzie on the road. Lets stop wasting money in no man's land and nail the real enemy.