Conference Board Indicators: Recession Likely Over, Recovery Has Begun

Since early June we've been observing more and more markers that a US economic recovery has started. Monday brought even more data to support that assertion.

A close look at the elements of Monday's Conference Board report supports the view that the recession ended in June and recovery has indeed begun. The CB's leading index posted a third month of consecutive gains rising 0.7 percent in June. Again the gain was much stronger than most economists had expected.

With reporting of the June data, several recession-ending items within the CB’s report are now in place. Most economists agree that these data need to be in place before a recession is officially considered over...

1. Three straight gains in the ratio of coincident-to-lagging indicators, (check)

2. Three months of 50-plus readings in the diffusion index, (check)

3. Three consecutive gains in the leading index along with an annualized reading over that period in excess of 10 percent. (The data shows a 12.8% annual rate -- the best since Jan 2002) (check)

The three check boxes follow last week's Economic Cycle Research Institute (ECRI) Weekly Leading Index which surged to an annualized five-year high of 7.0%.

This is just more data to support the claim that when NBER's cycle-dating committee finally marks the official 2008-2009 recession end, it will point to June 2009.

You may recall a professor from Kansas make that recession-ending prediction back in November 2008.

Given the strength of the current ECRI growth indications and the CB's LEI trends, those predicting a lackluster Q3 of growth are likely to be significantly surprised.

Comments

[Jordan Lindsey:]

Amazing you see a recovery and the Fed this morning does not see one for an "extended period".

"Accommodative policies will likely be warranted for an extended period," Bernanke wrote in the article published on the Wall Street Journal's web site. "At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road."

Jul 21 10:14 AM

[markfl:]

"Trucking and logistics company Werner Enterprises Inc. said Monday its second-quarter profit fell 30 percent as economic weakness continued to eat into demand for shipping. . . .

Werner said its fleet size fell by 10 percent during the period, and said it does not expect to cut its fleet further, though remains doubtful the industry will improve in the near term."
www.google.com/hostedn...

Interesting. So if the economy is expanding right now, who, other than CSX, is hauling the wholesale supplies and finished products associated with rising economic output?

Jul 21 10:29 AM

[John Galt:]

(Sarcastic voice on)
It sure does FEELl like everything is getting better...
(Sarcastic voice off)

Jul 21 11:36 AM

[Stimpy:]

Good news: "Recovery has begun!!!"

Bad news: It will be 1% growth for decades. And at 1% growth, much of the S&P doesn't generate enough cash to pay it's debts...

Jul 21 12:55 PM

[semperpax:]

Yes. The recovery has begun. Thank God ... or Obama or Paulson or Bernanke or Geithner or Congress. I can relax and start planning my next vacation and my next 9,000-square-foot house. Thank God.

Jul 21 01:10 PM

[The Good Ne...:]

@Jordan,

Have a closer look at Ben's words: "...monetary policy remains focused on fostering economic recovery." He did *not* say "halting contraction."

Indeed growth has resumed.

He continued, "We will be looking to see more evidence of a sustained recovery that will begin to close the output gap, (and) begin to improve labor markets."

That appropriate policy stance will lead to a quite healthy uptick in Q3/Q4.

Bernanke is proud of the work done so far. And he should be.

GNE

Jul 21 01:30 PM

[Fighting Yoda:]

I think leading indicators - PMI, S&P, consumer confidence etc are all speculative - hope, hype, dreams - but not reality. The real economic indicators are all readily available and for all to see - capacity utilization, wages, employment, hours worked - all these continue to contract - this does not indicate recovery.

The GDP itself may expand in the 3rd Qtr, it would simply be because of the math in the way GDP is computed - low inflation (or even deflation) expands the GDP (rather than deflate it by the inflation factor), reduced imports add to the GDP. We have low inflation (actually deflation) right now, imports are falling fast (net reduction in deficits) - all this is economic contraction. Govt. is spending money that adds to GDP - but we know this spending is short term and non sustainable.

Jul 21 02:34 PM

[Trend Surfer:]

No disrespect to you Mr. Goodnews. But, can a recovery occur when all the problems that started the recession in the first place has not been corrected?

Can positive turn in the leading indicator be taken as an absolute indicator of economic recovery/growth? If so, can you please explain.

I've heard many proclamations about the economy based on the interpretations of indicators. But many professionals also know that a turn in the indicator can be interpreted as a reversal or simply a brief correction. Please explain why you are so strong in your belief that this turn is the real mccoy.

Jul 21 07:18 PM

[John Bowman:]

"Bernanke is proud of the work done so far. And he should be."

How can anyone respond to a flabbergasting statement like that? I literally got a brain freeze as I read it.

Jul 21 10:13 PM

[Moon Kil Woong:]

I think Paul Krugman said it pretty correctly last week when he said the economy is dropping less quickly. That still doesn't mean it's rising.

Some people think the stock market's rise means economic recovery. Rather it is a proxy for long term bond risk adversion along with commodities and latent inflationary concerns. If the dollar rises sharply on a commodities retracement the market could easily reverse course as well.

Jul 22 12:47 AM