(LEI) Leading Economic Indicators are not very reliable.

Discussion in 'Economy' started by Neubarth, Aug 27, 2009.

  1. Neubarth

    Neubarth At the Ballpark July 30th

    Nov 8, 2008
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    South Pacific
    Of the positive contributors to an increasing LEI in the past few months– beginning with the largest positive contributor – were
    1. interest rate spread,
    2. average weekly initial claims for unemployment insurance (inverted),
    3. average weekly manufacturing hours,
    4. index of supplier deliveries (vendor performance),
    5. stock prices, and
    6. manufacturers' new orders for nondefense capital goods.

    Certainly new orders for nondefense capital goods is a reliable indicator, though a lot of that was indirectly related to new car orders because of anticipated rapid sales with the cash incentive from the government. How long will we see the stimulus effect from Cash for Clunkers? I doubt that it will be very long. Still the capital goods that were required in new car manufacturing is a factor. Traditional retooling time in the car industry would also add to that number of capital goods ordered. Even though we are making a lot less cars, we have to have the machinery to make the newer models. That includes the electric and hybrid cars.

    Stock prices have gone up, but P/E ratios are outrageous and I am frightened to buy into this market. I rode it up part of the way, but would not be long now.

    Supplier deliveries are up slightly and that is because inventories were allowed to fall a little too far. So we are making up for decreased inventory.

    Average weekly manufacturing hours are up in some regions of the US and down in others. Funny how those stimulus packages work.

    This is the season for unemployment claims to go down. With more and more people falling off the rear end of the benefit wagon, UNEMPLOYMENT in general is going down because we seem to lose sight of those people who lose their benefits. I don't trust any Federal unemployment numbers. Everything they post is a lie.

    Interest rate spread is the leading influencing factor in the improving LEI. Funny that, when you consider that interest rates have been all over the place lately. There are two camps out there. One believes that we are going to see massive inflation and the other believes that we are going to go into a deflationary spiral. Personally, I think for the short term we are going to see things stay close to where they are with some food prices going down as we approach autumn. Once people realize that we are not going to heaven and hell in the same six months, I expect that interest rates will become stable and we will know what the real interest rate spread is.

    I remain the ever faithful "economic recovery cynic."
    Last edited: Aug 27, 2009
  2. Toro

    Toro Diamond Member

    Sep 29, 2005
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    The Big Bend via Riderville
    We will probably have come out of the recession this quarter.

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