Conference Board: Indicators Rising and Economy Slowing (?!!?)

The Conference Board’s Leading Economic Indicator (LEI) continues its ever improving rise in July 2011, yet the Conference Board continues to try to rationalize that the economy is slowing.

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI continued to increase in July. However, with the exception of the money supply and interest rate components, other leading indicators show greater weakness – consistent with increasing concerns about the health of the economic expansion. Despite rising volatility, the leading indicators still suggest economic activity should be slowly expanding through the end of the year.”

Says Ken Goldstein, economist at The Conference Board: “The economy is slow, with little momentum, and shows no indication of acceleration. The gains in the LEI are modest, especially the nonfinancial indicators. Despite these growing risks, the economy should continue to expand at a modest pace through the fall.”

The LEI increased 0.5% in July to 115.8 (2004 = 100), following a 0.3% increase in June, and a 0.7% increase in May. The largest positive contributions came from money supply, the interest rate spread, and average weekly initial claims for unemployment insurance (inverted).

Even the Conference Board’s coincident indicator continues to rise despite much less good data.

This index is based to a large extent on monetary measures which have been extraordinarily strong with stimulative interest rates set at artificially low levels by the Federal Reserve. For this reason, the hyper-values produced by this index are not necessarily linked to any real economic dynamics. Econintersect does not believe this index is properly indicating the current economic dynamics.  The discussion published by Conference Board Economists seem to indicate that they have the same opinion.

On the other hand, ECRI’s WLI (which Econintersect reports on weekly) has the exact opposite trend lines.

Econintersect believes the USA economy saw a cycle peak in April 2011, and the economy is continuing to soften (analysis here).

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