September Leading Indicators

The Conference Board’s Leading Economic Indicators report for September gained 0.2% over August based primarily on the strength of the same sub-component which caused it to rise last month.  This should sound familiar by now as the yield curve measuring interest rate differentials between the fed funds rate and 10-year Treasury yields skewed the total higher.  This relationship has had a pervasive influence on the LEI for some time now and will likely continue to do so for an extended period.  Unfortunately there seems to be little commensurate favorable response from our economy.  The other positives came from an increase in money supply, vendor performance, consumer expectations, and new consumer goods orders.  The factory workweek had no influence while new orders for non-defense capital goods, stock prices, and initial jobless claims all fell.

The increase isn’t very significant, pointing to a continued sluggish pace of economic growth.  We’ll take a positive number over one which is negative any day, but fear some recent reports regarding orders and expectations may soon head south.  We certainly hope there never comes a time when the only positives are derived from the yield curve and an increase in the money supply.  The Fed can’t heal this economy by itself.