The U.S. Leading Economic Index (LEI) increased 0.4 percent in July to 95.8, following a 0.4 percent decline in June, and a 0.3 percent increase in May, matching the index level in May at the highest level in four years going back to June 2008 (see chart above). Compared to its year earlier level, the July LEI is 1.50% higher, which is lower than the 6% annual gain last July compared to 2010, indicating that the pace of improvement in the LEI has slowed over the last year.
Says Ataman Ozyildirim, economist at The Conference Board: “With this month’s increase, the U.S. LEI returned to its May level. The majority of its components improved, led by large contributions from housing permits and initial unemployment claims. The LEI’s six-month growth rate seems to be stabilizing, pointing to a continuing but slow expansion in economic activity for the rest of the year. Meanwhile, the coincident economic index, a measure of current conditions, has been rising slowly but steadily, with all four components improving over the last six months.”
Says Ken Goldstein, economist at The Conference Board: “The indicators point to slow growth through the end of 2012. Lack of domestic demand remains a big issue. However, back-to-school sales are better than expected, suggesting that the consumer is starting to come back. Retail sales this time of year are often an indicator of how the holiday season will turn out.”
MP: Like many other economic variables, indicators and forecasts, the LEI in July predicts ongoing, but moderately sluggish economic growth in 2012, but is not currently pointing to an economic slowdown that would be considered recessionary. As Brian Wesbury's team at First Trust Portfolio has been describing it, we've got a "plow horse economy" that keeps moving forward, slowly but surely.
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