Index of Leading Economic Indicators

The Conference Board’s October reading of the Leading Economic Indicators (LEI) moved impressively higher.  The month-over-month change of 0.9 percent is a re-acceleration following September’s slowdown showing a meager 0.1 percent hike.  Most of the components in the index positively affected the reading.

During the six months ending in October, the index improved 3 percent, and 6 out of the 10 components in the LEI were higher in the same period.  Month-over-month, 9 out of 10 components improved.  Housing permits made the biggest impact after being the greatest laggard in September.  The interest rate difference between long- and short-term Treasury Debt continued to drastically influence the LEI.  The average hourly workweek in manufacturing also significantly added to the monthly jump.

The Conference Board’s LEI has been growing since before the end of the last recession.  The pace of growth has been heavily swayed by the interest rate environment, the money supply, and the stock market.  The Federal Reserve’s monetary policy and quantitative easing programs have rendered the financial indicators within the LEI less useful than normal.  This influence has caused the LEI to grow to an all time high while the real economy, as measured by the Conference Board’s Coincident Economic Index, has yet to recover its 2007 peak.  It’s as if the financial sector of the economy has left the real economy behind to figure itself out.  (by Christopher Cox)