LEIs Dip Again

Friday, September 23, 2005 | 05:48 AM

You know the drill:  The (modified) leading indicators come out yesetrday -- weak once again; The excuse making should begin any moment. This time, expect to hear how this sentiment drop shouldn't be taken too seriously, due to Katrina.

Except all this data predates Katrina.

Obligatory snark:  I guess we now wait with baited breath to see if and when the Conference Board will reconfigure the Leading Economic Indicators (again) to shift the weighting of the sentiment aspect . This time, they will attempt to explain how when sentiment declines, its a net positive to the economy. It turns out that the only way sentiment is a negative is when there are widespread mass suicides . . .


The Conference Board said five of 10 indicators that make up the leading index rose in August. These included manufacturers’ new orders for non-defense capital goods, manufacturers’ new orders for consumer goods and materials as well as stock prices.

Negatives sapping the index included activity in building permits as well as the consumer confidence.

Conf Board Chart:


Here's the specific data from the Conf Board:

Leading Index Factors
1 Average weekly hours, manufacturing 0.2533
2 Average weekly initial claims for unemployment insurance 0.0328
3 Manufacturers' new orders, consumer goods and materials 0.0755
4 Vendor performance, slower deliveries diffusion index 0.0702
5 Manufacturers' new orders, nondefense capital goods 0.0191
6 Building permits, new private housing units 0.0263
7 Stock prices, 500 common stocks 0.0375
8 Money supply, M2 0.3521
9 Interest rate spread, 10-year Treasury bonds less federal funds 0.1034
10 Index of consumer expectations 0.0298


The Conference Board's Index of Leading Economic Indicators Dips in August   (PDF)
September 22, 2005

Gloomy sentiment erodes economic indicator
Future economic activity gauge falls for second straight month in August
MSNBC,  10:42 a.m. ET Sept. 22, 2005

Friday, September 23, 2005 | 05:48 AM | Permalink | Comments (3) | TrackBack (0)
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ECRI's Weekly Leading Index (WLI) is similarly tepid, with the accompanying text modestly upbeat. The recent revision to the Conference Board's series is an oddity, but it brought LEI more in line with WLI. Ignoring the possibility that the Conference Board did a dumb thing (if it stuck to Geoffrey Moore's methods, that should not be the case, but I don't know how the switch was done), then we have two composite indices indicating pretty much the same thing. Either they are missing a recent structural change that makes their answers wrong, or they are doing something very valuable - telling us something about workings of the economy that are not obvious on the surface. I hope for the latter, but I suspect the former.

Posted by: kharris | Sep 23, 2005 8:27:28 AM

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