US: Leading Indicators

Thu Oct 22 09:00:00 CDT 2015

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

Building permits, which are volatile month-to-month, often prove to be the swing component for the index of leading economic indicators which, pulled down by weakness in Tuesday's permits data of the housing starts report, came in at the low end of expectations at minus 0.2 percent for September. Losses in the stock market were a negative for September as they were for August. Manufacturing components were mostly soft. Pluses were led, as they often are, by the report's interest rate component that reflects the Fed's accommodative policy. Today's results are not a positive for the outlook on growth which the report pegs at a moderate 2.5 percent trend.

Market Consensus Before Announcement
Held down by factory components and lower stock prices, the index of leading economic indicators has been flat the past two reports and isn't expected to bounce back at all in September, at a consensus of no change.

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.