Friday, February 20, 2009

January Leading Indicators Up; Second Straight Advancing Month

For the second consecutive month, the index of leading economic indicators rose, gaining 0.4% in January, following a revised 0.2% increase in December, according to tha latest Conference Board data.

The recent gains are due, significantly, to the Federal Reserve's huge increases of the money supply, which I have been reporting on regularly here at EPJ.

For January, five of the 10 indicators rose, with the largest positive contribution from the money supply..

The positive contributors — beginning with the largest positive contributor — were real money supply, the interest rate spread, index of consumer expectations, manufacturers' new orders for nondefense capital goods, and manufacturers' new orders for consumer goods and materials. The negative contributors — beginning with the largest negative contributor — were average weekly initial claims for unemployment insurance (inverted), building permits, average weekly manufacturing hours, stock prices, and the index of supplier deliveries (vendor performance).

The leading economic index now stands at 99.5 (2004=100). Based on revised data, this index increased 0.2 percent in December and decreased 0.7 percent in November. During the six-month span through January, the leading economic index decreased 1.9 percent, with only three out of ten components advancing.

The lagging economic index stands at 113.9 (2004=100) in January, with one of the seven components advancing. The positive contributor to the index was the ratio of consumer installment credit to personal income. The negative contributors — beginning with the largest negative contributor — were average prime rate charged by banks, change in labor cost per unit of output, commercial and industrial loans outstanding, and average duration of unemployment (inverted). The ratio of manufacturing and trade inventories to sales and change in CPI for services held steady in January.


  1. The ratio of coincident to lagging indicators has historically been the best predictor of the "bottom". This ratio continued its down trend from 0.9105 in Dec 08 to 0.9069 for Jan 09.

  2. Yeah, but the coincidents are lead by the leading indicators.