Thursday, November 18, 2004

This makes it five in a row now for the Conference Board's Index of leading economic indicators.
The US economy is "losing steam," the Conference Board said, reporting that the index of US leading economic indicators fell 0.3 percent in October, marking the fifth straight decline.

The string of decreases "is a clear signal that the economy is losing steam and may start off 2005 with a relatively weak pace of economic activity," said Ken Goldstein, economist for the board.
The last time we saw this many declining months in a row was . . . oh, wait a minute, since the Conference Board took over responsibility for computing and disseminating these Composite Indices in 1995, the leading indicator has never seen a five-month decline.

This is all meaningless noise, of course. The Very Smart Economists are telling us
"It's not yet a signal that we've got real trouble in the economy," said Gary Thayer, chief economist with A.G. Edwards & Sons Inc. in St. Louis. "It's signaling more moderate growth in the months ahead, but not necessarily a recession."

Gary Bigg, associate economist at Bank of America in New York, said: "We don't view it as particularly worrisome. More recent data is signaling that the economy is starting to pick up steam and strengthening."
So is the Conference Board's leading index just a bunch of hot air?

The leading index claims to forecast economic conditions 3-6 months into the future. From a high in April 2000 to bottoming out in March 2001, the index changed around -1.6% (they revised all their numbers in December 2000 so it's hard to exactly compute the change). And lo and behold, the US entered unofficial recession in 2000:III and experienced declining GDP also in 2001:I and 2001:III.

As of October the index is already -1.2% from its high in May. Clearly something unpleasant is on its way.

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