Roller coaster ride almost over?
If there is one economic report I look forward to every month, it's the Conference Board's Leading Economic Index. Most of the stuff written by economist is so full of statistics, formulas, tables and graphs that by the time you weed through it all you forgot what the information says; the Conference Board's report is different. They use only 3 major categories:
Leading Economic Index -- LEI -- 10 indicators Coincident Economic Index -- CEI -- 4 indicators Lagging Economic Index -- LAG -- 7 indicators
This month I'll sum up the report by this quote: "All in all, the behavior of the composite indexes suggests that the recession is bottoming out and that economic conditions will continue to improve in the near term." Pretty simple to understand, straight forward and to the point.
Let's look for some gems in the report:
LEI - 8 of 10 increased. The 2 that were down were average work week and building permits. We all know we have excess housing inventory and both present and future foreclosure inventory to work through. What I thought was interesting was supplier deliveries, and manufacturer's orders of nondefense capital goods and new orders for consumer goods and materials were up - more on this in just a minute.
CEI - Unchanged - Industrial production is up with the nonagricultural payroll down. Let's go back to Accounting 101. Industrial production up, supplier deliveries up, manufacturer's orders up, average work week down, nonagricultural payroll down; sounds like improving margins are in store for the manufactures. That is a very good sign.
LAG - Improvement in labor cost per unit of output; again a good sign of future profit margins.
At least this report makes me feel better. Orders, production and deliveries up with labor costs down -- I like that. It seems like the roller coaster may have reached the bottom and all the bad news that hasn't already hit the fan at least has been discussed and accounted for. I think that we can be confident that a year from now the economy will be better than it is today.
Jim Van Meerten is an investor and writes about financial matters here and on Financial Tides. Please leave a comment below or email to FinancialTides@gmail.com.