November’s Leading Indicators

November’s Leading Economic Indicators (LEI) index rose 0.5% according to the Conference Board.  This jump was above general expectations and adds to the 0.9% rise we saw in October.

An analysis of the LEI’s components shows positive trends for both the labor market and housing.  Gains were also registered in manufacturing and consumer spending.  All of this is good news of course, providing some evidence that fears we may slip back into recession can be set aside for a while yet.

One common way many economists interpret the LEI is as an indicator for the short-term direction of our economy in general, just looking out over the next three to six months.  Unfortunately, a couple of flies remain in the ointment.  Europe’s problems do not seem all that close to resolution and could skip across the pond and onto our shores sometime in the future.  Secondly, despite many components showing some strength, the Fed’s influence on our yield curve remains a primary driver of the positive trend.  If they suddenly reverse course and begin raising rates, things could turn down in a hurry.  That said, things are rarely close to perfect.  We will take the good news as it comes and hope for more.