Leading Economic Index Upward Movement Continues

Since the second quarter of 2009, the Leading Economic Index® has continued an almost uninterrupted vertical ascent.  From the February 2011 press release:

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.1 percent in January to 112.3 (2004 = 100), following a revised 0.8 percent increase in December, and a 1.1 percent increase in November.

Says Ataman Ozyildirim, economist at The Conference Board: “With January’s slight increase, following two large gains, the U.S. LEI is still pointing to economic expansion in the coming months. Falling housing permits and weakening labor market indicators were barely offset by the continued positive contributions of the financial components. The LEI remains on a rising trend, with its growth rate picking up in recent months. However, current economic conditions, as measured by the coincident economic index, while improving slowly, remain weak.”

Says Ken Goldstein, economist at The Conference Board: “The economy gained some momentum in late fall, and the latest data suggest that trend will continue. The cumulative change in the U.S. LEI over the last six months is a sharp 3.0 percent, signaling continued expansion.”

As a disclosure, I am biased against the LEI, as it is too heavily weighted towards liquidity (analysis here).  Econintersect has reviewed all the leading indicators (analysis here).  Further, a fairly negative review of the LEI was published by a major bank (analysis here).

The LEI is measuring the economic gains in the upper segments of the private sector – and is not measuring well the real economy of Joe Sixpack.  Econintersect forecasts the economy is improving– but not to the levels or extent implied by this index.  A better leading index forecasting economic growth is the WLI which is reviewed by Econintersect in its weekly economic summary articles (active link).

The Conference board also has a coincident index which improved this month also.

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.1 percent in January to 102.1 (2004 = 100), following a revised 0.3 percent increase in December, and a 0.2 percent increase in November.

Econintersect believes a better coincident index is the CFNAI (analysis here).

Related Articles

Leading Economic Indicator Isn’t Indicating the Real Recovery  by Steven Hansen (Seeking Alpha)

Economic Forecast for February 2011 – Black Swan Uncertainty  GEI Monthly Forecast

December Economic Outlook Slightly Improved  by John Lounsbury

Leading Economic Indicator Points to Spring 2011 Economic Improvement  by Steven Hansen

Chicago Fed Acvtivity Index Improves in December  by Steven Hansen

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