By Rom Badilla, CFA and TJ Kim
Friday's data suggests that amid signs of improving growth for the U.S. economy, sentiment among consumers is improving. The Conference Board announced that the Leading Indicators Index (LEI) for the US economy is up .4% to 95.8, outperforming the consensus of economists' forecasts by .2%.
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Leading Economic Indicators
The index of U.S. leading economic indicators is a composite of ten indicators of leading the overall economic activity. Among the ten components of the LEI, New Orders for Consumer Goods and Material, Housing Permits/Starts, and the Initial Jobless Claims account the most for last month's rise in economic activities. All three are supported by optimistic consumer attitudes toward the economy as seen from the Consumer Sentiment report released Friday by the Confidence Board.
In a different report, Consumer Sentiment unexpectedly climbed to 73.6 points after two months of decline. The recent upbeat in consumer sentiment is mirrored in both the Housing Markets and in Retail Sales. Last month, Retail Sales rebounded from declines earlier in the year by rising 0.8%, signaling improving consumer spending which takes about 70 percent of the economy.
Moreover, as discussed in the last article, "Housing Starts Falter But Permits Provide Hope," the housing market appears to be on the road to recovery with consumers regaining confidence in the economy and finding opportunities from less costly properties and record low mortgage rates.
In the retail and housing industries, businesses are revving up, possibly stimulating the growth of the nation's economy as a whole. However, there are yet no clear signs of sharp economic growth which may lead to any inflationary pressures. Interest rates have risen from their lows recently with the 10-Year at 1.80%. Having said this, it is too early to announce bad news for bond market bulls and if this backup is the beginning of a new broader trend given the headwinds of the Fiscal Cliff and the re-emergence of the European debt crisis. Time will tell.