Leading Economic Indicators Rising Steadily

By:: Peter King | April 20, 2010

The Conference Board Leading Economic Index (LEI) rose again in March, reaching an all-time high after a year of steady increases. But consumers still remained pessimistic about the direction of the economy, as the Board’s gauge of consumer expectations fell for the third month in a row.

“The indicators point to a slow recovery that should continue over the next few months,” said Ken Goldstein, a Conference Board economist. He added, “Strength of demand remains the big question going forward. Improvement in employment and income will be the key factors in whether consumers push the recovery on a stronger path."

The U.S. LEI rose 1.4 percent in March to reach an all-time high, according to the new report, with a reading of 109.6 on a scale where 100 represents the 2004 LEI. The index turned up sharply in March 2009 following a long decline and has been rising steadily ever since.

The LEI is a predictor of future economic trends. The Board’s Coincident Economic Index (CEI), which tends to mirror current trends, also increased in March by 0.1 percent and has increased modestly for the past six months, following a steep decline during the previous year and a half.

Seven of the 10 indicators that make up the LEI showed increases in March, with the interest rate spread, supplier deliveries, stock prices, building permits, unemployment claims and manufacturer’s orders all moving in a positive direction. At the same time, consumer expectations fell for the third consecutive month, suggesting that the average citizen does not yet see signs of improvement in the economy.

Declining money supply and orders for nondefense capital goods were the other two leading indicators that declined.

By contrast, all indicators in the CEI rose in March, with the biggest contributors being nonagricultural employees, personal income and industrial production. Meanwhile, it was reported that the U.S. Gross Domestic Product (GDP) expanded at an annual rate of 5.6 percent in the fourth quarter of 2009, up from a rate of 2.2 percent in the third quarter.

The Lagging Economic Index also showed improvement in March, increasing 0.1 percent, but was held back by an increase in the average length of unemployment, compared to positive trends in outstanding commercial and industrial loans and the cost of labor.

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