Indicator Suggests (Economic) Recovery Will Pickup

Reuters ^ | 7/21/03

[Steven W.]

WASHINGTON (Reuters) - A key economic forecasting gauge rose in June for the third consecutive month, suggesting the struggling U.S. economy will strengthen in the second half of 2003, a private research firm said on Monday.

The Conference Board said the index of leading indicators rose 0.1 percent in June, slightly below expectations of Wall Street economists, who had forecast it to rise 0.2 percent.

``After a weak first half, the leading economic indicators are suggesting a better economic performance in the second half of 2003,'' Conference Board chief economist Ken Goldstein said in a statement.

But Goldstein warned even if better growth developed in the third quarter, it could take until the first quarter of next year before the labor markets really improve. The unemployment rate rose in June to a 9-year high of 6.4 percent.

``Business investment in equipment and inventory restocking were the missing ingredients so far this year. The U.S. economy will not grow by more than 2 percent in the second half of 2003 unless this investment rises,'' Goldstein said.

Spending by corporate America has fallen far short of levels before the economic slump, and economists believe a true recovery will not take place until investment kicks in and firms start hiring more workers and buying new equipment.

June's small gain in the leading indicator builds on the impressive 1.1 percent increase in May, raising analysts' hopes the timid recovery in the world's largest economy may be gaining momentum.

``It supports the idea, given May and June together, that the economy appears to be recovering, but of course we have been here before,'' said Banc of America Securities senior economist Peter Kretzmer.

The U.S. dollar retreated modestly in initial reaction to the lower-than-expected rise in the leading indicator, while U.S. stock market losses deepened. Market players generally consider the indicator only a minor and slightly dated piece of economic data.

The Conference Board said four of the 10 indicators that make up the leading index increased in June, led by real money supply, stock prices, building permits and the inverted average weekly initial claims for unemployment insurance.

``The stock market gains are obviously one of the things that make us more confident that consumers are likely to feel better and to spend at a more persistent pace,'' Kretzmer said.

The Conference Board said the coincident index rose 0.1 percent in June, matching a rise in May. The lagging index, a measure of past trends in the economy, fell 0.5 percent in June after a 0.1 percent decrease in May.

[Steven W.]

Interesting with all the usual doom & gloom posts from the usual suspects not a single mention or reference to the 3 month streak in leading economic indicators ... are they immune to any kind or form of good news, like water to a witch or a cross to a vampire?

[2 Kool 2 Be 4-Gotten]

I've seen many, many articles just like this one and I always end up with the same reaction which is that -

Leading Economic Indicators are said to be some special kind of predictor that takes stock prices as only one of many components. But I have never seen the LEI tell me something I didn't already know from watching the Dow Jones or the S & P.

Can anyone cite even a single example when the LEI would have said something that was at variance with the signals being emitted from the Stock Market? I can't even recall a single example, but I'd like to be educated on this point.

[Political Junkie Too]

Indicator Suggests (Economic) Recovery Will Pickup

That's okay, the media and the Democrats will see that it doesn't.

-PJ

[Brian S]

Yes, we have read this before. For example (notice some of these dates):

Leading indicators rise: Economy shows strength; jobless claims unexpectedly continue retreat
			Posted by JohnHuang2 On 05/17/2001 11:47 PM EDT CNN/fn ^ | Thursday, May 17, 2001
Economic Growth Ahead? Index Of Leading Indicators Rises For 4th Straight Month
			Posted by JohnHuang2 On 08/20/2001 11:18 PM EDT CBSNEWS ^ | Monday, August 20, 2001
Nov. Leading Indicators Up Second Straight Month
			Posted by RCW2001 On 12/19/2001 10:40 AM EST with 7 comments Reuters ^
Leading indicators rise 1.2 percent in December, third consecutive gain
			Posted by Oldeconomybuyer On 01/22/2002 10:11 AM EST with 8 comments AP ^ | 1-22-02 | EILEEN ALT POWELL, AP Business Writer
Recession fears fade on strong indicators
			Posted by mdittmar On 11/28/2002 6:23 PM EST with 4 comments Washington Times | November 28, 2002 | ASSOCIATED PRESS
CA: Indicators signal weak tech rebound
			Posted by NormsRevenge On 01/13/2003 11:02 AM EST with 5 comments SJ Mercury News ^ | 1/12/03 | David A. Sylvester

[FITZ]

I think a lot depends on the part of the country you live in. Here unemployment just went double digit and is climbing fairly fast, no businesses are moving in but some are leaving. If you live in an area that is very prosperous now and everyone is looking for workers, you'd get a different feeling.