"The index points to continued, though slower, U.S. growth for the rest of this year," says Bart van Ark, chief economist of The Conference Board. "Public debt and deficits weigh heavily on growth prospects on both sides of the Atlantic. We project a serious slowdown in European growth in 2011, which could further weaken the U.S. outlook.""The LEI for the United States has been rising since April 2009, and though its growth rate has slowed in 2010, it is well above its most recent peak in December 2006," says Ataman Ozyildirim, economist at The Conference Board. "Correspondingly, current economic conditions, as measured by The Conference Board Coincident Economic Index® (CEI) for the United States, have been improving steadily since November 2009, thanks to gains in payroll employment and industrial production."
Let's look at the data:
First, note that last month's decline was revised to .0%. In addition, note the coincident indicators are increasing. Both of these are important developments. However,
In the above chart, I've placed a square around the good points and left the bad points unmarked. Note there some major bad things that occurred; it's just that the good points outweighed the bad. This is not a good development -- that there are drops in five of these indicators. In addition, there are some important drops -- especially those in building permits and manufacturers new orders of non-defense capital goods. The point is that while the overall index went up, there is renewed issues of concern about some of the numbers.
However, there are fundamental reasons why there are weightings to some of these indicators -- some points are obviously more important than others. Hence, the fundamental reason why the index increased last month despite the drops in some important issues.
As NDD points out below, the drop in building permits is very troubling. New construction is very important for economic activity. In addition, I would add that I am deeply concerned with the initial claims numbers -- that number has been flashing for a while now.
