The Conference Board Leading Economic Index (LEI) rose for the sixth straight month [pdf] in September 2009. Combined with flat performance in the Conference Board Coincident Economic Index (CEI), this signals a possible bottoming out of the current U.S. economic recession.
The LEI, which measures economic activity for the next six months, increased 1%, from 102.5 to 103.5. This marked the LEI’s sixth straight month of growth following 20 straight months of decline. In addition, the CEI, which measures current economic activity, remained flat at 99.9, following fractional increases in July and August and eight straight months of decline that ended with a 0.4% decrease in June. A score of 100 marks the performance level of both the LEI and CEI in 2004.
Eight of the ten indicators that make up the LEI increased in September. The positive contributors – beginning with the largest positive contributor – were interest rate spread, index of consumer expectations, average weekly initial claims for unemployment insurance (inverted), stock prices, real money supply, index of supplier deliveries (vendor performance), manufacturers’ new orders for non-defense capital goods and manufacturers’ new orders for consumer goods and materials. The negative contributors – beginning with the largest negative contributor – were average weekly manufacturing hours and building permits. In August, only five of 10 indicators increased and two remained flat.
In addition, three of the four indicators that make up the CEI increased in September. The positive contributors to the index, beginning with the largest positive contributor, were industrial production, personal income less transfer payments, and manufacturing and trade sales. The negative contributor was employees on non-agricultural payrolls. This performance was a repeat from August.
According to Conference Board economist Ken Goldstein, taken together, the performances of the LEI and CEI continue to indicate an economic recovery is developing. However, he cautioned that it is not yet clear how strong that recovery will be. “The intensity of that recovery will depend on how much, and how soon, demand picks up,” said Goldstein.
Two other consumer indices also paint a somewhat optimistic picture of the direction of the U.S. economy, although not all recent consumer and economic research suggests an end to the recession is near. The Deloitte Consumer Spending Index, which attempts to track consumer cash flow as an indicator of future consumer spending, rose 11.6% in September 2009.
Although the Consumer Reports Index, which tracks consumer financial and employment numbers to obtain an overall sense of consumer health, climbed from 38.1 in September to 40.3 in October, the index still stands well below 50, indicating continuing negative consumer sentiment regarding the economy.
In contrast, two other consumer indices have recently declined. Following an August 2009 increase driven by an optimistic consumer future outlook, the Conference Board Consumer Confidence Index fell from 54.5 to 53.1 in September 2009. The most drastic decline came in the Present Situation Index, with the future-looking Expectations Index declining only half a percentage point.
And according to the September 2009 Advance Monthly Retail Trade Survey from the U.S. Census Bureau, U.S. retail and food service sales fell 1.5%, from $351.4 billion to $344.7 billion, in September. This is the second slip for U.S. retail and food service sales in the past five months, with a revised 0.2% dip in July.
However, a 10.4% drop in sales at motor vehicle and parts dealers significantly outpaced any individual increases, which were mostly below 1%. Last month, motor vehicle and parts dealers reported a 10.6% increase which was likely spurred by the federal government’s now discontinued “Cash for Clunkers” incentive program. The motor vehicle and parts sector bears careful monitoring in the coming months to see if the short-term spike in sales caused by Cash for Clunkers has any long-term positive economic effect.
One other consumer index, The American Express Spending and Saving Tracker, is giving mixed signals on the near-term direction of the economy. It indicates consumers will spend more on travel and dining out in the next 30 days, but less on groceries and personal grooming.
The LEI, which measures economic activity for the next six months, increased 1%, from 102.5 to 103.5. This marked the LEI’s sixth straight month of growth following 20 straight months of decline. In addition, the CEI, which measures current economic activity, remained flat at 99.9, following fractional increases in July and August and eight straight months of decline that ended with a 0.4% decrease in June. A score of 100 marks the performance level of both the LEI and CEI in 2004.
Eight of the ten indicators that make up the LEI increased in September. The positive contributors – beginning with the largest positive contributor – were interest rate spread, index of consumer expectations, average weekly initial claims for unemployment insurance (inverted), stock prices, real money supply, index of supplier deliveries (vendor performance), manufacturers’ new orders for non-defense capital goods and manufacturers’ new orders for consumer goods and materials. The negative contributors – beginning with the largest negative contributor – were average weekly manufacturing hours and building permits. In August, only five of 10 indicators increased and two remained flat.
In addition, three of the four indicators that make up the CEI increased in September. The positive contributors to the index, beginning with the largest positive contributor, were industrial production, personal income less transfer payments, and manufacturing and trade sales. The negative contributor was employees on non-agricultural payrolls. This performance was a repeat from August.
According to Conference Board economist Ken Goldstein, taken together, the performances of the LEI and CEI continue to indicate an economic recovery is developing. However, he cautioned that it is not yet clear how strong that recovery will be. “The intensity of that recovery will depend on how much, and how soon, demand picks up,” said Goldstein.
Two other consumer indices also paint a somewhat optimistic picture of the direction of the U.S. economy, although not all recent consumer and economic research suggests an end to the recession is near. The Deloitte Consumer Spending Index, which attempts to track consumer cash flow as an indicator of future consumer spending, rose 11.6% in September 2009.
Although the Consumer Reports Index, which tracks consumer financial and employment numbers to obtain an overall sense of consumer health, climbed from 38.1 in September to 40.3 in October, the index still stands well below 50, indicating continuing negative consumer sentiment regarding the economy.
In contrast, two other consumer indices have recently declined. Following an August 2009 increase driven by an optimistic consumer future outlook, the Conference Board Consumer Confidence Index fell from 54.5 to 53.1 in September 2009. The most drastic decline came in the Present Situation Index, with the future-looking Expectations Index declining only half a percentage point.
And according to the September 2009 Advance Monthly Retail Trade Survey from the U.S. Census Bureau, U.S. retail and food service sales fell 1.5%, from $351.4 billion to $344.7 billion, in September. This is the second slip for U.S. retail and food service sales in the past five months, with a revised 0.2% dip in July.
However, a 10.4% drop in sales at motor vehicle and parts dealers significantly outpaced any individual increases, which were mostly below 1%. Last month, motor vehicle and parts dealers reported a 10.6% increase which was likely spurred by the federal government’s now discontinued “Cash for Clunkers” incentive program. The motor vehicle and parts sector bears careful monitoring in the coming months to see if the short-term spike in sales caused by Cash for Clunkers has any long-term positive economic effect.
One other consumer index, The American Express Spending and Saving Tracker, is giving mixed signals on the near-term direction of the economy. It indicates consumers will spend more on travel and dining out in the next 30 days, but less on groceries and personal grooming.
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