The Conference Board has released its reading on leading economic indicators (LEI) for the month of July. Readers might want to be warned that “leading” may be a bit of a misnomer here. This is a July reading, so much of the data is already known ahead of time, and we have already seen many newer readings indicating business trends for August.
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Leading indicators were in the red at -0.2% in July, down to a reading of 123.3. This compares to a 0.6% increase in both June and in May. Bloomberg had the consensus estimate looking for a gain of 0.2%.
The Coincident Economic Index rose by 0.2% in July to 112.5, following a 0.2% increase in June and a 0.1% increase in May. The group’s Lagging Economic Index rose by 0.3% in July to 118.1, following a 0.7% increase in June and a 0.3% increase in May.
The Conference Board said of its report:
The U.S. LEI fell slightly in July, after four months of strong gains. Despite a sharp drop in housing permits, the U.S. LEI is still pointing to moderate economic growth through the remainder of the year. Current conditions, measured by the coincident economic index, have been rising moderately but steadily, driven by rising employment and income, and even industrial production has improved in recent months.
What matters here is what the LEI is really made of. It measures 10 different components:
- Average weekly hours, manufacturing
- Average weekly initial claims for unemployment insurance
- Manufacturers’ new orders, consumer goods and materials
- ISM Index of New Orders
- Manufacturers’ new orders, nondefense capital goods excluding aircraft orders
- Building permits, new private housing units
- Stock prices, 500 common stocks
- Leading Credit Index
- Interest rate spread, 10-year Treasury bonds less federal funds
- Average consumer expectations for business conditions
Due to this “leading” report not being so leading, it rarely impacts the financial markets. Equity markets have risen off of Thursday’s lows after 90 minutes of trading. The S&P 500 was down almost 20 points at 2,060 and the DJIA was down 178 points at 17,170.
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