Leading Indicators Improve in August

By Daniel Indiviglio

The slow recovery will continue, according to the Conference Board's Leading Economic Indicators Index (LEI). It rose 0.3% in August. That's not much, but it's the best we've seen since May -- after which time when the recovery appeared to take a step back. The data says the economy is moving in the right direction, just more slowly than we would prefer.

Here's the chart from the Conference Board:

CB LEI 2010-08.png

For some reason they expanded the timeline this month for the chart, so it's harder to see recent incremental changes. But you can sort of see that the index declined in June and was virtually flat in July with a small 0.1% increase. The August value looks to be its highest yet. With that said, it's also pretty clear that leading indicators aren't improving anywhere near as aggressively as they were from late 2008 through early 2009. So we shouldn't expect to see the economy expand as rapidly through the end of the year as it did during that time.

What's driving the index to increase? The components contributing most were interest rate spreads and money supply, both of which are under the influence of the Federal Reserve. If you take those out of the equation, the index would have declined slightly. So the private sector still isn't looking good, but the index suggests that cheap financing and easy money might help the economy to expand.

This article available online at:

http://www.theatlantic.com/business/archive/2010/09/leading-indicators-improve-in-august/63452/