Index of Leading Indicators increases for second month in a row

Conference Board ^ | 2/19/09 | Ken Goldstein

[Redmen4ever]

The Conference Board Leading Economic Index™ (LEI) for the U.S. increased 0.4 percent

[Redmen4ever]

Ever since the development of the index of leading indicators, we have always had a recovery after three months running of uptick, no false-positives and no false-negatives. (In contrast, we have had a few false-positives with regard to falling into recession.) With two upticks, the odds of the start of a recovery have to put as at least 50-50.

[shankbear]

OBAMA HAS SAVED OUR ECONOMY!!!!!!!! Right on, right on, right on!!!!! s/

[TSgt]

We are not even close to a recovery.

Although the LEI has risen during the past two months, it is too soon to say the contraction in the LEI that began in July 2007 is coming to an end. The LEI has continued to decline over a six-month period in the second half of 2008, with continued widespread weakness among its components. The primary sources of strength in the LEI in recent months have been the consistent and large contributions from inflation-adjusted money supply and the interest rate spread, and consumer expectations have only provided a weak positive contribution. At the same time, the CEI remains on a downtrend that began in November 2007, and the decline in the index has accelerated in recent months. All in all, the recent behavior of the composite economic indexes suggests that the economy will continue to be in recession in the near term.

[Moonman62]

From the rest of the article:

Although the LEI has risen during the past two months, it is too soon to say the contraction in the LEI that began in July 2007 is coming to an end. The LEI has continued to decline over a six-month period in the second half of 2008, with continued widespread weakness among its components. The primary sources of strength in the LEI in recent months have been the consistent and large contributions from inflation-adjusted money supply and the interest rate spread, and consumer expectations have only provided a weak positive contribution. At the same time, the CEI remains on a downtrend that began in November 2007, and the decline in the index has accelerated in recent months. All in all, the recent behavior of the composite economic indexes suggests that the economy will continue to be in recession in the near term.

[NVDave]

This is the sort of thing I’m talking about when I say conservatives need to quit waving the headline numbers in the air while saying “everything is going to be A-OK!” This is why the GOP lost in 2008: we kept saying “The economy is fine!” while waving around the BEA GDP report, failing to read the internals of the GDP reports, which showed that only exports were holding up the headline numbers and the domestic economy was in recession.

The only reason why the LEI is showing ANY increase in the rapid increase in the money supply by the Fed. That’s it. That’s where the good news ends.

Take that out of the computation and the LEI doesn’t indicate any recovery.

It’s kinda like people who were waving around the PPI yesterday, saying it is showing inflation. No, it isn’t. It is showing the increase in finished oil product prices from December lows. The guts of the PPI report show that deflation is now hitting the service industries.

*Read* the guts of the reports people.

[ckilmer]

more likely low gas prices are stabalizing things a bit.

[Redmen4ever]

The idea that the current recession was obvious in real time is not warranted. In real time, this recession only became a near certain thing around May or June of last year. Take a look at the following (not my work).

http://economistsview.typepad.com/economistsview/2008/05/recession-proba.html

The NBER called the recession we’re in a few months later. They kind of surprised me by calling the start of the recession to be December of the prior year, as I had been thinking we might have had a short, mild recesion foollowed quickly by a second, major one. But, I have no beef with their decision.

In terms of my own call of the current recession, I went out on that limb in January 2008, when the index of leading indicators had registered three successive downticks. You will notice that I carefully qualifyied myself. You just don’t know how bad things will get. Boy, am I ever glad that I said that.

http://mises.org/story/2853

I have yet to follow-up that post with one regarding a recovery, as I have done with every down and up of the business cycle for some thirty years now. Were the index of leading indicators to again move up with their next release, I will do so.

Mind you, I don’t think the government has done much in a positive way to position the economy for recovery; and, the things the government has done have been a mixed bag.

On the one hand, the Fed has provided liquidity during a time of panic, and that’s good.

On the other hand, we have a radical Democrat Congress on a spending binge and this risks higher taxes and inflation; and, we have a President who gives every indication of being a socialist, which is really bad for the stock market and for the economy.

So, I would not expect the kind of vibrant growth we enjoyed wuding the 1980s and ‘90s; and, my inclinations tell me that we may be in for another decade of stagflation, like the 1970s.