Mis-Leading Economic Indicators

Friday, August 19, 2005 | 12:33 PM

Surprise! The revised Leading Economic Indicators increased. 

As we previously mentioned (Juiced Data), this fantasy-based indicator is now less than worthless -- it is actively misleading.

Whoop de doo. Had the Conference Board cheerleaders (the people behind the shift) not changed the model, LEIs would have come in negative again, for something like 9 of the past 12 months.

On the strange and bizarre planet Conference Board, a flattening yield curve is somehow economically stimulative. For this crowd of absurdists, it takes a full yield curve inversion to start raising concerns about any potential slowing. To paraphrase Woody Allen: "I have to - I have to go now, because I, I'm due back on the planet Earth."

I'd like to remind everyone who is writing about the LEIs that if you fail to note the recent changes to the indicators, you are doing your readers a disservice. You don't have to call them (as I do) absurd -- -- but at least inform your readers as to what actually has happened with these. THE LEIs were negative, and the changes made the past negative readings positive after the fact.

>

UPDATE:  August 20, 2005 7:04 am

"The yield curve slope is down to 20 basis points as measured by the difference in 10- and 2-year Treasury yields."

Dan Gross points out that the present curve is so flattened that "the premium you get for tying up cash in government bonds for an additional eight years is measly 20 cents on every $100."

Question for the Conference Board brain trust:   And thats stimululative how . . . ?

>

UPDATE II:  August 21, 2005 6:24 am

A picture is worth a 1000 words:
click for larger chart

0802_sm

The chart, via Bronson Capital Markets Research, provides a graphic depiction of what the unadulterated LEIs suggest . . .   


>

Sources:
U.S. leading economic indicators rise in July
Thu Aug 18, 2005 12:14 PM ET
Lisa Lambert
http://today.reuters.com/investing/financeArticle.aspx?type=economicNews&storyID=
2005-08-18T161346Z_01_N18316222_RTRIDST_0_ECONOMY-INDEX-UPDATE-1.XML

U.S. July Leading Indicators Index Increases 0.1%
Bloomberg
http://www.bloomberg.com/apps/news?pid=10000087
&sid=aCxyYHjfCLMM&refer=top_world_news

U.S. leading indicators up 0.1% in July
By Rex Nutting, MarketWatch
Last Update: 10:14 AM ET Aug. 18, 2005 
http://www.marketwatch.com/news/story.asp?guid=
%7BD584BF52-F82E-475C-B0B5-F9BA0ACD3A3D%7D&siteid=google

Friday, August 19, 2005 | 12:33 PM | Permalink | Comments (6) | TrackBack (1)
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Listed below are links to weblogs that reference Mis-Leading Economic Indicators:

» (Mis) leading indicators, data surprises and Keynes' beauty contest from New Economist
This is a very long and somewhat belated post, inspired by a 17 August blog by Mark Thoma on The Use of Leading Economic Indicators in Economic Forecasting. Mark cites a paper by Stock and Watson and a Bloomberg column by Caroline Baum, which asked wh... [Read More]

Tracked on Sep 8, 2005 11:21:32 PM

Comments

Hope to see you post some more about this including some charts comparing the unrevised LEI trend with the new, "improved" LEI trend

Posted by: Steve | Aug 19, 2005 2:50:43 PM

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