Tuesday, January 19, 2010

Future Stat of the Week: Leading Economic Indicators to Soar Again

If we've had one theme since starting this blog, its that the leading economic indicators and its primary leader over the last 12 months, the yield curve, is completely thrown aside by most economists and market experts. It shouldn't be though as it continues to forecast a strong recovery. You can fret about a double dip recession all you want, but it isn't going to happen while the LEI and the yield curve is this positive. So why invest for the correction if the signal isn't pointing that way?

Anybody following these indicators should know that the yield curve expanded to record levels recently and hence it should be no surprise that the LEI for December expanded at a fast clip yet again. Initial jobless claims also will juice the number. Economists expect a 0.7% rise after 0.9% in November. Two very solid gains.


Market Consensus Before Announcement (Bloomberg)
The Conference Board's index of leading indicators rose a strong 0.9 percent in November, following a 0.3 percent boost the month before. November's increase was led by the yield curve component which had a 0.33 percentage point contribution, followed by initial unemployment claims, 0.26 percentage points, and the average workweek for manufacturing, 0.19 percentage points. Also making positive contributions were building permits, stock prices, and money supply. The coincident indicator rose 0.2 percent in November, following no change the month before. Looking ahead, the leading index should post another advance with the yield curve likely the strongest contributor. A sizeable positive contribution is also expected from initial jobless claims with a number of other components having marginally positive contributions. Real money supply may tug down slightly on the December leading index.

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