- by New Deal democrat
We have enough information now to estimate the Index of Leading Economic Indicators for January 2010. Just to referesh your memory, the LEI has a 5 decade history, and was formerly kept by the Commerce Department until its computation and makeup was outsourced to the Conference Board about a decade ago. The 10 indicators, with the weights given each indicator, are as follows:
- real money supply (35%)
- average weekly manufacturing hours (25%)
- interest rate spread (10%)
- manufacturers' new orders for consumer goods (8%)
- supplier deliveries (7%)
- stock prices (4%)
- consumer expectations (3%)
- building permits (3%)
- average weekly initial claims for unemployment insurance (inverted) (3%)
- manufacturers' new orders for durable goods (2%)
Here's my estimate of how the Leading Economic Indicators fared in January. Despite the increase in initial jobless claims and the shallow correction in the stock market, most were positive:
Real M2 remains slightly positive, so +0.02
Aggregate hours in manufacturing were up +0.14
The yield curve is still positive +0.30
ISM deliveries up strongly +.10
Consumer sentiment up, +.05
Building permits were strongly positive +.15
Durable goods' grew +.02
Stocks' 1 months vs. 3 month performance 0.0*
Consumer nondurables even in December, 0.0
Jobless claims turned negative, -0.15
*I believe the index is measured over 3 months, but I am being conservative given the correction in January.
Bottom line: it looks like January Leading Economic Indicators will net about +0.6, the ninth positive reading in a row. YoY the LEI will be up over 8%. With the exception of a few months in 2004, this will be the strongest performance in nearly two decades.
As an addendum, I read over at Barry Ritholtz' place the pundits' opinions that the LEI is "the most useless indicator." This is generally because all of its components are known before it is released. Too bad most pundits don't pay attention, since the LEI has outperformed many if not most of them in the last year. Before you go examining the minutiae of tree bark, maybe you ought to notice at the forest first.
