US: Leading Indicators

Fri Sep 18 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Leading Indicators - M/M change 0.2% -0.3% to 0.4% 0.1% -0.2% 0.0%

Growth isn't likely to pick up any steam going into year-end, at least based on the index of leading economic indicators which came in at only plus 0.1 percent in August following a revised no change reading for July. Working hours are down and new factory orders have been weak, offsetting strength in employment and consumer readings and also building strength in housing permits. The coincident index points to only marginal ongoing growth in August at plus 0.1 percent.

Market Consensus Before Announcement
The index of leading economic indicators is expected to rise 0.2 percent in August after dipping 0.2 percent in July. Unusual swings in housing permits have been distorting recent LEI readings which otherwise have been pointing to strong rates of growth ahead for the economy.

A composite index of ten economic indicators that should lead overall economic activity. This indicator was initially compiled by the Commerce Department but is now compiled and produced by The Conference Board. It has been revised many times in the past 30 years -- particularly when it has not done a good job of predicting turning points.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the index of leading indicators, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly -- and causing potential inflationary pressures. The index of leading indicators is designed to predict turning points in the economy -- such as recessions and recoveries. More specifically, it was designed to lead the index of coincident indicators, also now published by The Conference Board. Investors like to see composite indexes because they tell an easy story, although they are not always as useful as they promise. The majority of the components of the leading indicators have been reported earlier in the month so that the composite index doesn't necessarily reveal new information about the economy. Bond investors tend to be less interested in this index than equity investors. Also, the non-financial media tends to give this index more press than it deserves.