Today's report on the economy, the Leading Indicator index, was touted as still further evidence of how "strong" our economy is.

The Leading Indicator report, considered a broad overview of the direction of our economy, was reported as increasing + 0.2%, slightly below the expected +0.3% predicted. A review of how today's total was calculated, however, reveals much cause for concern. Many important indexes declined. Many of the positives were only weakly positive. Manufacturers' new orders for non-defense capital goods declined 7% over the last month, for an annualized rate of decline of -84%. Building Permits declined 6.3% over the last month alone, and have and have declined 22% since April. Though Manufacturers' New Orders for Consumer Goods increased slightly (+0.4%), they are still 2% below August levels, and 4% below June's level. Even the big "gainers" are of dubious benefit. One big gainer was Stock Prices, which added +0.13% to the total index. Another gainer was the index of Consumer Expectations, which was +0.19. (Indicating media spin about the economy has been very successful.) The Average Workweek increased from 41.1 hours in August to 41.2 hours in October. This added +0.06 to the total. However, the Average Workweek was less than it was in August, July, and June, and the same as it was in May and April. Another very dubious positive.

The biggest gainer, however, was the increase in M2 money supply of 1.2% over the last month. This added a total of +0.43 points to the total +0.2 number. Had the money supply increase been 0, Leading Indicators would have shown a net change of -0.23%. Had the increase in money supply been the same as the previous month's +0.2%, the total Leading Indicator Index would have been -0.03%. Making the M2 number still more dubious is the fact that it is not an actual "recorded" statistic. It's an "imputed" statistic, meaning it is an estimate (quesstimate?) Meanwhile, the indicator considered most predictive of the health of the economy, the interest rate spread, was -0.52%.

Below is a copy of November 20th's Leading Indicator report from the Conference Board.



The Conference Board's Leading Indicator report can be found at:
http://www.conference-board.org/pdf_...ci/lei1106.pdf


Though this month's reading is touted as being "positive," a closer review indicates how spurious and artificial this increase is. Many of us cannot understand how an increase in the M2 money supply can be considered a positive. Stripping out the money supply increase alone would make Leading Indicators negative for October. Furthermore, is it really a "positive" for the money supply to increase at a 14.4% annualized rate in one month? Are we now considering inflation a positive indicator?

unlawflcombatnt

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