Recovery gains momentum with sixth straight increase in leading indicators
Filed under: Economy
More evidence that the U.S. economy is on a GDP growth track: the Index of Leading Economic Indicators jumped 1.0 percent in September, The Conference Board announced Thursday -- its sixth straight monthly increase. Except for average workweek and building permits, all of the leading indicators contributed positively to the index in September.Ken Goldstein, economist for The Conference Board, said in a statement, "The LEI has risen for six consecutive months and the coincident economic index has increased in two of the last three months. These numbers strongly suggest that a recovery is developing. However, the intensity of that recovery will depend on how much, and how soon, demand picks up."
Economists surveyed by Bloomberg News had expected the index to rise 0.6 in September. The index rose a revised 0.4 percent in August, 1.0 percent in July, and 0.8 percent in June. The LEI index now stands at 103.5 (base year, 2004 =100).
During the six-month span through September, the leading economic index increased 5.7 percent, according to The Board. That's the fastest increase since 1983 and it's up sharply from the 2.7 percent decline for the previous six months – an increase that's indicative of an upturn in economic activity. The Board also called the strength in the components "widespread in recent months."
Eight of the 10 indicators that comprise the LEI increased in September: interest rate spread, index of consumer expectations, average weekly initial claims for unemployment insurance (inverted), stock prices, real money supply, index of supplier deliveries (vendor performance), manufacturers' new orders for non-defense capital goods and manufacturers' new orders for consumer goods and materials. The negative contributors were average weekly manufacturing hours and building permits.
The LEI index is designed to forecast likely economic conditions six to nine months out, although economists caution that the LEI is a general, multi-variable indicator, vulnerable to revisions. Hence, investors should use it as a rough gauge of overall macroeconomic trends, not as a metric that precisely pinpoints economic cycle turns.
Analysis: U.S. stock markets should like the September LEI statistic. The length (sixth month) and sharpness of the rise are indicative of a recovery that certainly has gained its footing, and perhaps even tacked on a little momentum. With that as a backdrop, barring an unexpected domestic crisis or international event, a double-dip recession for the U.S. economy would take many economists by surprise: the likelihood of a double dip at this juncture is about 10-15 percent.
That said, as recent U.S. economic expansions have demonstrated, the initial stage of a recovery does not guarantee job growth, or even the end of job layoffs. For example, after the 2001-2002 recession, the economy continued to lose jobs for more than a year after the economic recovery started. Given the large number of jobs lost during the 2007-2009 recession, a repeat of that workforce performance would be unacceptable, as it would drive already near-10 percent U.S. unemployment to even higher levels. Hence, the onus is on policy makers and business leaders to implement strategies that get the great American job machine going again and increase demand, to sustain what right now looks like an expansion that's gaining momentum.
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Reader Comments (Page 1 of 1)
10-22-2009 @ 1:18PM
Paul said...
The economy is not in recovery, it reminds me of how we got into this mess, get on the market train before you get left behind, things are much better and the long run looks great, don't believe it, Cities are broke, Counties are broke, State Governments are broke and the Federal Government is broke, we have become a debtor nation, our money is worthless, if you received your new Healthcare cost it went up 20%, don't forget Interest Rates, Inflation is on the Way
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10-22-2009 @ 1:56PM
Tech said...
Maybe only for global corporations who make money in Chindia but in the USA we're tapped out. Only thing that's going up is the stock market with all the money they stole from us little people while passing out billions in "bonus" money for pulling off the biggest crime in history. Only in America, where criminals run the show. In Japan they would have to publicly apologize and comit Hari Kari. In China they would be shot. Here they are called leaders and smart people? Theft is theft so where's the cops? Where's the sheriff? How about the FBI? The corporation I worked for stole hundreds of millions from the taxpayers with the stroke of a pen and got away with it and only got a slap on the wrist from Justice and Congress? How much did that cost to pay them off and who took their filthy money? America is doomed with these criminals selling us out and looting the people. When will the people wake up and round these con artists and thieves up?
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10-22-2009 @ 2:12PM
steve said...
Remember when these A bombs would not say the "R" recession word when we where already DEEP in it? And are now rushing to push the "R" recovery word on us. Oh ,foolish me they where talking about themselves and their economy. The ponzilike false one they live in. There are 2 economies. The rich market and the poor market. Do they really think I will put my eggs in Merill lynchs' basket again? I had one account that had 70k in it for 10 years ,you know what I pulled out with in 07' ?........ 40K... Wallstreet scum,short selling bastards.
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10-23-2009 @ 2:59PM
Optimist said...
I guess we should be happy for some good news instead of complaining about some of the bad stuff that has already happened. America has always moved forward in spite of tough situations. Let's at least try to keep up the momentum. Could it hurt ? The dollar is only worth the confidence that the world has in our nation. I hope that the U.S can move forward as a country that is to be admired and respected. So many people have fought and given their lives for our country. I have faith in our basic principles no matter what others may think.
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10-22-2009 @ 3:15PM
matthew said...
read the posts below! anger!
wall street is doing well because they borrow at almost 0% interest OUR money, then they leverage it and make their money. sure, banks are doing well. but are the real fundamentals strong?
no. not at all.
gasping is more like it.
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10-22-2009 @ 4:02PM
cnsjjc said...
Whatever happended to Adam Smith's "the only purpose of money is to facilitate commerce"?
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10-22-2009 @ 5:00PM
TEVA said...
With all the tax money that government has spent or printed
I would think this bump in the GDP is due to cause and effect rather than the health of the economy.
Not olny is it a false reading it very timeing is suspect
with the elections in just two weeks.
I think that if it had not been for the elections in November
president Obama would of pushed his agenda forword
and passed health care and cap and trade legislation
back in august.
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10-25-2009 @ 4:18PM
Chris said...
Hi Joe,
Would you be interested in being a contributing columnist or a freeland analyst at www.stockhere.com ?
Please reply to me at stockhere123@yahoo.com
Regards
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