US: Leading Indicators

Thu Jun 22 09:00:00 CDT 2017

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

The index of leading economic indicators started the year off fast but has been slowing the last two reports, at an as-expected 0.3 percent gain in May with April revised 1 tenth lower to a 0.2 percent gain. Most components have been showing strength with the exception of building permits, which have been down, and manufacturing hours which have been flat. The latest results point to steady but no more than moderate economic growth.

Market Consensus Before Announcement
The index of leading economic indicators has been signaling solid strength ahead for the economy, at 0.3 percent gains in both April and March which is also Econoday's consensus for May. Low interest rates and strong consumer confidence have been leading pluses for this report.

The index of leading economic indicators is a composite of 10 forward-looking components including building permits, new factory orders, and unemployment claims. The report attempts to predict general economic conditions six months out.

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.