Follow the Leader: Index of Leading Economic Indicators, August 2009

Today’s results of the Conference Board’s Leading Economic Indicators showed another significant monthly increase climbing .6% compared to July, bringing the annual increase to 1.89% and leaving the index at a level of 102.5.

On the face of it this is clearly a Bullish “Green Shoots” development as this series (an aggregate of 10 component leading indices) is signaling a clear shift from leading contraction to expansion though the leading index is strongly influenced by stocks (i.e. the inclusion of the S&P 500 as one of the leading indicators) and the pronounced “V”-shaped bounce coming directly on the back of such a dramatic period of decline appears suspicious.

Could we be headed into a second dip (… similar to mid-1981) as the government’s Keynesian chicanery shows itself to have only propped demand but failed to encourage real “organic” demand?

Only time will tell…

click to enlarge

Comments

[rosey99]

This one never fails to amuse me. Stock prices and the yield curve are components of the leading indicator. And when the leading indicator rises, stocks tend to rise and the curve tends to steepen. Throw money supply into the mix and the tail is really trying to wag the dog.

Given the surreal times in which we live, one has to wonder if the liquidity driven miracle/tragedy of the last ten years might render this indicator less useful as a predictive tool. I'm not saying it's useless, but IMO a modicum of doubt is more than justified.

2009 Sep 21 05:08 PM