I continue to be amazed at the continued press being given to OPINION of folks indicating the USA economy is about to pick up. Is there any evidence that an economic pickup is on the table?
Looking at the leading indices from several sources do not offer much hope.Â
Leading Index for the United States
This index has a good record of leading GDP in direction (not necessarily amplitude) by six months (four months in reality as it is issued almost 2 months into the forecast period). Â This index is now showing a declining rate of growth.
Leading Index for the United States from the Philadelphia Fed is the super index for all the state indices. The models include variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.
ECRI’s Weekly Leading Index
ECRI’s Weekly Leading Index (WLI) is presented as leading economy which is not exactly the same as GDP – even so there is reasonable correlation. In the case of the WLI, it is issued almost in real time so the full 6 months of forward forecasting is evident in real time.Â
ECRI’s WLI Growth index value remains marginally above zero which according to their definition means the economy six month from today will be marginally better than today. A positive number shows an expansion of the business economy, while a negative number is contraction. The trends in the last 12 months have remained in a very narrow slightly positive channel. The methodology used in created this index is not released but is widely believed to be monetary based.
The Conference Board’s Leading Economic Indicator (LEI)
Looking at historical relationships, this index’s 3 month rate of change (red area in chart below) must be in negative territory many months (6 or more) before a recession occurs. In mid-2012, the rate-of-change made several small incursions into negative territory – but is currently in positive territory; however the growth is declining.
