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Monday, July 23, 2012

Recent economic data

The LEI came out last week showing a decline for the second time this year.  Here is the chart.

If you look at the history of this index you will see that it usually turns down for quite a few months before a recession starts.  That has not happened yet.  If we are in a recession it would be different then past history.  I don't think this index is measuring the negative economic pressure coming from abroad very well.  One thing that really stands out on this chart is the overall weakness of the index.  The last recession is the first one where the index went from an all time high to below the prior recession low.  That shows how severe that recession really was.  Based on past history the index should be near or at new highs by now.  The huge amount of stimulus that has been applied is not translating into economic activity very well.  It sure is adding to the national debt though.  We cannot spend our way to prosperity.  I wonder how long it will take people to figure that out.  Sorry for the minor rant, sometimes I can't help myself.

Here is a couple of quotes from conference board members.

Says Ataman Ozyildirim, economist at The Conference Board: "The U.S. LEI declined in two of the last six months, and its six-month growth rate has eased in the last three months. The strengths among the leading indicators have become less widespread as consumer expectations and manufacturing new orders offset gains in the financial, labor, and construction-related components. Meanwhile, the coincident economic index, a measure of current economic conditions, has risen slowly but steadily in the last three months."

Says Ken Goldstein, economist at The Conference Board: "The U.S. economy is growing very slowly. The CEI basically reflects this steady but soft pace of overall economic activity. The LEI is pointing to no strengthening over the next few months, as the economy continues to sail through strong headwinds domestically and internationally."

They seem to be indicating there is no sign of economic strengthening visible yet.  We will just have to see if it continues weakening.  Despite the fact the LEI index has not rolled over as long as it usually does before a recession check out this chart.

This chart is looking more like we could be in or near recession.  There was a period in the early 60s that looked similar to today where we avoided recession.  Other then that, readings at this level have meant recession. 

Next up is the Philly Fed.

There was a slight uptick, but nothing to write home about.  I thought this was an interesting chart.

This is a second trip for the 6 month MA to dip below zero.  As the text states it has a really good track record for indicating a recession.

This next chart is a bit scary.  You may want to skip it if you are looking for positive data.

There does seem to be pretty good correlation between the employment sub-index and the non-farm payroll numbers.  This is the first real sign I have seen that indicates the labor market is beginning to falter.  We will see if it is a warning sign for the next report.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.