IB Net Payout Yields Model

Stat of the Day: Leading Economic Indicators Continue to Rise

After a few months of basically stagnant numbers in June and July, the August Leading Economic Indicators (LEIs) jumped 0.3%. Still not a robust number, but one that signals the economy should continue growing at a moderate level.

The LEIs are likely the most under followed economic series around. It measures such mundane but very important economic stats such as interest rate spreads, M2 supply, weekly jobless claims, and average hourly work week. The markets sill seem more enamored with housing starts, monthly jobless report, or even the FED minutes.

For August the interest rate spread and the M2 money supply made the biggest positive impact. Two numbers not regularly followed by the media and especially small investors. Both signal future growth in the economy especially since the LEIs have mostly been positive this year other then the June minor drop. Definitely nothing that supports a double dip.

  • The Conference Board LEI for the U.S. continued to increase in August. The interest rate spread, real money supply, and the average workweek made the largest positive contributions to the index this month, more than offsetting the negative contributions from initial unemployment claims (inverted) and supplier deliveries. The six-month change in the index has slowed to 2.0 percent (about a 4.1 percent annual rate) for the period through August 2010, down from 4.8 percent (about a 9.7 percent annual) for the previous six months. In addition, the weaknesses among the leading indicators have become slightly more widespread than the strengths over the past six months.
  • Seven of the ten indicators that make up The Conference Board LEI for the U.S. increased in August. The positive contributors – beginning with the largest positive contributor – were the interest rate spread, real money supply*, average weekly manufacturing hours, building permits, stock prices, index of consumer expectations, and manufacturers’ new orders for nondefense capital goods*. The negative contributors – beginning with the largest negative contributor – were average weekly initial claims for unemployment insurance (inverted), the index of supplier deliveries (vendor performance), and manufacturers’ new orders for consumer goods and materials*.


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