The Conference Board’s Composite Index of Leading Economic Indicators increased 0.4% (4.4% y/y) in August following an unrevised 0.3% July gain. Three-month growth remained firm at 5.5% (AR).
Performance amongst the components of the leading indicator series was mostly positive. Building permits, a steeper interest rate yield curve, consumer expectations for business/economic condition, the ISM new orders and the average workweek series each contributed positively to the overall index rise. Stock prices and factory orders for both consumer and capital goods had neutral effects. Initial claims for unemployment insurance had a negative effect on the index.
The Index of Coincident Economic Indicators held steady m/m, up 1.9% y/y, following a 0.3% rise. Gains in payroll employment, personal income less transfer payments and business sales were countered by a decline in industrial production. Three-month growth in the index slowed to 1.4% (AR), its weakest since March.
I am a bit surprised that the LEI keeps rising amid generally tepid economic data in recent weeks. Especially since the ECRI Weekly Leading Index is clearly weak and the Surprise Index remains negative as the Ed Yardeni charts show.
So, I took a look at some of the series that are pushing the Conference Board’s LEI up:
- Building permits were up last month but not in the past year.
- The yield curve is not really steepening.
- The U of M Consumer Sentiment Index is rather weakish.
- Actual New Orders have flattened out. Markit’s Manufacturing PMI Index, which I consider more accurate and less volatile than the ISM, has been rather uninspiring lately: “new orders rose at a pace only slightly weaker than July. (…) new export sales were broadly unchanged in August, following a fractional contraction in July.”
- The average week rose a little last month after being in a very narrow range for 2 years. All of the rise came from overtime hours which can be volatile. And it’s not as if the work week could rise much more from its current 42.1 hours. It reached 42.2 hours 3 months during 2014, a number never exceeded since WWII!
These series have all in common that their most recent data were up but within declining or flattening trends.
In any case, here’s the still positive picture as Doug Short illustrates it:
DID HE REALLY SAY THAT?
Kim Jong Un of North Korea, who is obviously a madman who doesn’t mind starving or killing his people, will be tested like never before!
Why would you want to test an obvious madman given the kind of weapons he got?