U.S. Leading Indicators Continue To Signal Economic Recovery

The leaders haven't missed one yet in their sixty year history. Therefore, the probability is high that economic recovery is near for the U.S. Released yesterday, the Conference Board's Index of Leading Economic Indicators rose 0.3% in October. That followed an unrevised 1.0% September increase and was the seventh gain in a row. Moreover, the 10.2% (centered) rate of increase during the last six months was nearly the strongest since early-1983. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, consumer and capital goods orders.

The breadth of increase amongst the component series sagged a bit last month. Sixty percent of the components rose during October versus last month's reading of 75%. During the most recent six months, however, 80% to 90% of the series rose. Prominent in last month's increase was the steeper interest rate yield curve. The money supply, stock prices, hours worked, jobless insurance claims and orders for consumer goods contributed to the index's rise as well. These gains were offset by lower capital goods orders, lower building permits, quicker vendor performance, and lower consumer expectations.

Continuing to suggest that the rate of decline in the economy is slowing were the coincident indicators. They were unchanged during October after a slight September decline. During the last six months the 1.4% rate of decline in the coincident series compares with a shortfall of 8.0% at its worst in January. Prompting the moderation have been slight increases in industrial production, real personal income and higher business sales as well as fewer declines in payroll employment.

In a continued sign that excesses in the U.S. economy are falling, the lagging index has been down since December of last year. Leading the decline has been lower commercial & industrial loans outstanding as well as less consumer credit. The ratio of coincident-to-lagging indicators (a measure of economic excess) also continued higher for the seventh straight month to the highest level since November.

The Conference Board figures are available in Haver's BCI database. Visit the Conference Board's site for coverage of leading indicator series from around the world.

The Peak Oil Debate from the Federal Reserve Bank of Atlanta can be found here.

Orders in Italy and in France were up strongly in September but on different causes. Both posted an orders rise in excess of five percent on the month. But Italy’s orders were boosted by a 7% gain in foreign orders; in France foreign orders rose by just 0.3%. Over three months Italian foreign orders are up at a 25% annual rate while domestic orders have sunk, dropping at an 18% annual rate. French foreign orders are very weak over the past two months but an order spurt in July keeps its three-month growth rate for foreign orders ahead of its domestic order growth for now. Yr/Yr Italian domestic and foreign orders are at similar rates of growth with both declining by about 21%. Over the past year France’s foreign orders are weaker than total orders as domestic orders have buoyed the economy.

As a result overall French orders are up at an increasing strong pace. Italian orders are making a slower and less decisive turn higher.

On balance e-Zone countries are showing a turn for the better. Italy is lagging. But the Zone seems to be making a sustained move to better growth. France is one of the strongest EMU members and it has a large rise in its fiscal deficit to show for it.