LEI’s are up — but its only due to the Fed, as Money Supply and Interest Rate Spreads.
Leading economic indicators (LEI) index rose 0.3% month over month in December. Stock Prices, Jobless Claims, Pace of Deliveries, Average Work Week, and Building Permits were all negative. Consumer Goods Orders, Non-defense Cap Goods Orders, and Consumer Expectations were all essentially flat.
Coincident-to-lagging index fell; The coincident to lagging index, which tends to have a stronger correlation with GDP growth, conversely fell 0.1% over the month to stand 4.7% lower year-over year.
This metric has recently been flagging a sharper downturn in the “leading” index and bears watching going forward.
The surge in real money supply growth added a full percentage point to the headline number. From September til today, this has added between 0.4ppts and 1.0ppts to each month’s gain. The artificial boost to the LEIs has not translated into increased lending from the banks.
And, we see no reason to think this trend is going to change, regardless of Fed liquidity or recapitalization of banks.
M2 (Money Supply)*: 0.99%
Interest Rate Spread: 0.22%
Consumer Goods Orders*: 0.01%
Non-defense Cap Goods Orders*: 0.01%
Consumer Expectations: 0.00%
Stock Prices: -0.02%
Jobless Claims -0.15%
Pace of Deliveries -0.20%
Average Work Week -0.25%
Building Permits -0.31%
* Conference Board estimates
Update: January 27, 2008, 6:35am
Jake at Econompic shows this difference visually: