- by New Deal democrat
The very same data that told Bonddad and me seven months ago that the economic free fall was going to stop, and that has ever more strongly pointed to recovery, the Leading Economic Indicators, are now known for November.
As I hinted last week, this could be the first month since then that the LEI actually go down, although my best estimate is for a small gain, thanks to a surge in the manufacturing workweek, making it 8 positive months in a row. Here's the list with my best estimates:
The yield curve is still positive +0.25
Aggregate hours in manufacturing were up strongly +0.21
Stocks' 3 month gain is worth +0.1
Jobless claims were much better, +0.13
Durable goods' strong growth add +0.2
Consumer nondurables up substantially, + 0.1
Real M2* has turned slightly positive, so +0.05
ISM deliveries down, -0.08
Consumer sentiment down, -0.15
New home permits were down strongly -0.55
The bottom line: November LEIs (and revisions to October) will net the positive reading of +0.3; however, it is certainly withing the range of error if the weightings are slightly different for the index to go negative. Indeed, had the manufacturing workweek not grown, or had consumer nondurables not turned up, my estimate probably would have been negative.
I have bolded housing permits for an obvious reason: the shocking decline in housing permits and starts almost singlehandedly takes down the whole index for November. While I expect that number is a one-off event and will not be repeated in the next few months, it is a valid number and so the combined mediocre showing for October and November point to a softening economy during the first quarter of 2010.
On the bright side, YoY the LEI will probably be up 4.5% as of November. Simply going sideways this month would make the YoY LEI index up 5.1% this month, consistent with actual job growth in previous economic recoveries.