Leading Economic Indicators Fall Again

by: Barry Ritholtz

For the third time in four months, and 4th time in 6 months, the leading economic indicators fell signaling a slow down in the economy, if not an outright recession.

In each of the past two months, the LEI fell sharply. The greater than forecast 0.4% decline comes on top of a 0.5% drop in October.

At the same time, the Commerce Department reported a GDP of 4.9% for Q3. We have argued that the GDP is dramatically overstated, due to under-reported inflation.

The index of leading economic indicators fell for the third time in four months in November, signaling an increasing risk of a U.S. recession.

"After having been essentially flat since early 2006, the leading index has weakened sharply in recent months, and it has declined to its lowest level since the middle of 2005.

Meanwhile, the coincident index has continued to increase throughout most of this period, but its growth has moderated recently. In addition, real GDP has continued to expand, growing at an average annual rate of 3.1 percent through the third quarter of the year (including a 4.9 percent annual rate growth in the third quarter). The recent behavior of the composite indexes suggest that while slow economic growth is likely in the near term, risks for further economic weakness have increased."

Sources:

U.S. LEADING ECONOMIC INDICATORS
Global Business Cycle Indicators (PDF)
December 20, 2007 http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

U.S. Leading Economic Indicator Index Fell 0.4%
Bob Willis
Bloomberg, Dec. 20 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUi7bpAXii1c&