September Leading Economic Index

The Conference Board’s Leading Economic Index (LEI) advanced in September after falling flat in August.  Up 0.8 percent, this forward looking indicator is pointing to continued economic growth in the U.S.  It may even be pointing to faster growth.  In the last six months, the LEI has improved by just over 3.5 percent (about 7.1 percent annualized), faster than the 2.7 percent change in the previous 6 months (about 5.6 percent annualized).

Interest rates and credit made the largest impact on the index, but the increase was also pushed higher by seven out of the eight remaining components.  Central bank influence continues to keep the interest rate yield curve positive, and it became steeper in September as the difference between the virtually zero percent overnight interest rate and the 10-year Treasury bond widened to 2.44 percent from 2.33 percent a month earlier.  The Conference Board’s proprietary Leading Credit Index was the second largest contributor to the headline figure.  Four components (weekly unemployment claims, manufacturer’s new orders, building permits, and stock prices) moved from negative to become positive contributors in the period.  Only consumer expectations for business conditions subtracted from the total.

For now, our economy’s path of least resistance appears to be forward.  This foretelling  indicator pairs well with the recently released Chicago Fed’s National Activity Index we discussed yesterday, adding to evidence the economy is currently moving  forward just like the LEI suggested it would three to six months ago.  From the looks of things, America’s economic expansion is not over.   (by C. Cox)