The Conference Board reported this morning that the Index of Leading Economic Indicators was up 1.0%, its 6th straight advance. Since April the Index has improved 6.0%. It is now up 3.3% on a year-over-year basis.
"With the sixth consecutive increase, the LEI's six-month growth rate has improved to its highest pace since 1983," says Ataman Ozyildirim, Economist at The Conference Board. "Except for average workweek and building permits, all the leading indicators contributed positively to the index this month. At the same time, the contraction in the coincident economic index has halted in recent months, but the continued downtrend in employment is keeping this index of current economic conditions from rising faster."
Here is a graph of the LEI, as tweaked by the Conference Board, going all the way back to 1976, through the end of last year:
Here is the graph updated through today, of both the LEIs and Coincident Indicators, from Briefing.com:
Note the coincident indicators have now increased as well.
In general, the LEI is about the direction of the economy, not the amplitude of its move. But, with due regard towards "correlation does not equal causation," etc., it is worthwhile to note that even the "jobless" portions of the recoveries of 1992 and 2002-03 ended when the LEI were up about 5% YoY. Should the index simply move sideways for the next couple of months (and right now October is looking like it may wind up positive too based on the stock market and Initial Jobless Claims), the Index will be up nearly 5% YoY in December.
Even if one takes out the yield curve and the stock market, the index is still up in 5 of the last 6 months. With YoY deflation turning into inflation in the next month, the yield curve should accurately signal "easy money" again.
A few months ago certain critics were chiding Bonddad and myself that the LEI's hadn't led to actual growth in the economy yet. Hence, they were blogging "facts" while we were allegedly blogging fantasies -- ignoring that the leading indicators are specifically designed to lead! One week from today the 3rd Quarter GDP gets reported, and I don't know if there is a single reputable economist who thinks that will be a negative number. With the singular and very important exception of jobs, recovery has clearly taken hold -- exactly as the LEI predicted since this past spring.
