Year End 2017 Look At The Short Leading Indicators

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by: Hale Stewart

In his seminal work, in addition to his long leading indicators, Prof. Geoffrey Moore also proposed a series of 11 short leading indicators. These are more variable but typically turn a few months before the economy as a whole. Moore identified them as:

  • S&P 500 stock price index*
  • Average workweek in manufacturing
  • Layoff rate under 5 weeks
  • Initial claims for unemployment insurance*
  • ISM manufacturing vendor performance
  • ISM manufacturing inventory change
  • Journal of Commerce change in commodity prices
  • Change in deflated nonfinancial debt
  • New orders for consumer goods and materials
  • Dun and Bradstreet change in business population
  • Contracts and orders for plant and equipment

While a few of these are covered in my "Weekly Indicators" column, many are monthly. Since it's been a while, let's take a look at (most of) them.

To begin with, the two items I've marked with asterisks are what I call my "quick and dirty" metric. If stock prices have been increasing, and initial claims for unemployment decreasing, the economy is probably improving.

So, here is the S&P 500:

and here are initial claims for unemployment insurance:

Both of these continue to move in the right direction.

Turning to the producer side of the economy, the ISM new orders index has been very strong all year, and the underlying manufacturing index has gradually improved:

Core new factory orders for durable goods have surged in the latter part of this year:

The Bloomberg commodity index has been trending sideways this year, with some relative improvement in the last few months:

Meanwhile the manufacturing workweek has held generally steady:

Deflated consumer purchases of durable goods have continued to increase:

The number of those who have been unemployment for five weeks or less has improved markedly in the last few months:

These last two measures will be updated tomorrow as part of the monthly jobs report.

Finally, as a bonus, the number of initial jobless claims, discussed above, typically turns up YoY before recessions - sometimes shortly before, sometimes several years before. We aren't quite at that point yet:

In summary, none of short leading indicators are negative, and only a couple (the manufacturing workweek, industrial commodities) are flattish. The rest are positive. The good economic news of the last several quarters should continue for the next several as well.

New Deal Democrat, XE.com

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