LEI: Blecch!

Thursday, April 21, 2005 | 11:02 AM

The US Conf Board of Leading Economic Indicators slid -0.4% in March. The LEI have been soft for some time now, posting a marginal gain in February (0.1 %) and a decline in January (-0.3%).

Note that despite this morning's decent new claims number, the biggest negative factor in the index was average weekly initial claims for the month. Excuse me if I cannot muster much enthusiasm of the "Yeah! There are less layoffs than before" variety.

Only 2 of the 10 indicators that comprise the leading index were positive last month: interest rates and manufacturers' new orders for consumer goods and materials.

This is not an economy hitting a soft patch; rather, it is a choppy expansion with fading momentum. Higher energy prices, commodity costs, interest rates and taxes are not helping; Consumer confidence has faded and Business spending and hiring is (mostly) MIA.

Lastly, earnings have been very good -- but that's very much expected. Yesterday's CNBC poll had 3/4s of viewers expecting earnings to help the market. That suggests that good earnings are already factored into the market. Note that the year-over-year earnings gains for the S&P500 -- earnings momentum -- has been steadily fading since Q3 2003 (almost 30%) to Q1 2005 (12%). That ain't good either.

Sorry to be such a ray of sunshine, but I calls 'em as I sees 'em.

Thursday, April 21, 2005 | 11:02 AM | Permalink | Comments (1) | TrackBack (0)
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LEI should stand for Lagging Economic Indicators...the undercurrents for a strong 2nd half are there, thats what you see perculating....the riptide is the effect of high energy costs and the margin squeeze...thats why the reports are all conflicting...separate the wheat from the chaff and read between the lines.


Posted by: The Nattering Naybob | Apr 23, 2005 1:01:04 AM

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