U.S. Economy: The Leading Indicators Farce

unlawflcombatnt

Monday's report on the economy, the Leading Indicator index, was touted as still further evidence of how "strong" our economy is.

The Leading Indicator report, considered a broad overview of the direction of our economy, was reported as increasing + 0.2%, slightly below the expected +0.3% predicted. A review of how today's total was calculated, however, reveals much cause for concern. Many important indexes declined. Many of the positives were only weakly positive. Manufacturers' new orders for non-defense capital goods declined 7% over the last month, for an annualized rate of decline of -84%. Building Permits declined 6.3% over the last month alone, and have and have declined 22% since April. Though Manufacturers' New Orders for Consumer Goods increased slightly (+0.4%), they are still 2% below August levels, and 4% below June's level. Even the big "gainers" are of dubious benefit. One big gainer was Stock Prices, which added +0.13% to the total index. Another gainer was the index of Consumer Expectations, which was +0.19. (Indicating media spin about the economy has been very successful.) The Average Workweek increased from 41.1 hours in August to 41.2 hours in October. This added +0.06 to the total. However, the Average Workweek was less than it was in August, July, and June, and the same as it was in May and April. Another very dubious positive.

The biggest gainer, however, was the increase in M2 money supply of 1.2% over the last month. This added a total of +0.43 points to the total +0.2 number. Had the money supply increase been 0, Leading Indicators would have shown a net change of -0.23%. Had the increase in money supply been the same as the previous month's +0.2%, the total Leading Indicator Index would have been -0.03%. Making the M2 number still more dubious is the fact that it is not an actual "recorded" statistic. It's an "imputed" statistic, meaning it is an estimate (quesstimate?) Meanwhile, the indicator considered most predictive of the health of the economy, the interest rate spread, was -0.52%.

Below is a link to a copy of November 20th's Leading Indicator report from the Conference Board.

Leading Indicators

The Conference Board's Leading Indicator report can be found at:
http://www.conference-board.org/pdf_free/economics/bci/lei1106.pdf


Though this month's reading is touted as being "positive," a closer review indicates how spurious and artificial this increase is. Many of us cannot understand how an increase in the M2 money supply can be considered a positive. Stripping out the money supply increase alone would make Leading Indicators negative for October. Furthermore, is it really a "positive" for the money supply to increase at a 14.4% annualized rate in one month? Are we now considering inflation a positive indicator?

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

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The economy needs balance between the "means of production" & "means of consumption."

bonkey

My goodness...

Yet another "they say our economy is fine, but really they're lying" article. We see this about as often as "our economy is fine".

Conclusion - the people prediucting that the end is nigh may well be right eventually, but it would appear to be in the same manner that a stopped watch shows the right time twice a day.

Are we now considering inflation a positive indicator?

Would you consider deflation a positive indicator?
Would you consider stagnation a positive indicator?

Akrasia

bonkey wrote:

Would you consider deflation a positive indicator?
Would you consider stagnation a positive indicator?

yes, if we want to survive this climate change malarky

sovtek

bonkey wrote:

My goodness...

Yet another "they say our economy is fine, but really they're lying" article. We see this about as often as "our economy is fine".

Conclusion - the people prediucting that the end is nigh may well be right eventually, but it would appear to be in the same manner that a stopped watch shows the right time twice a day.


Would you consider deflation a positive indicator?
Would you consider stagnation a positive indicator?

In fairness the housing bubble that is bursting as we speak doesn't look good and the Bushies have cooked the books before.

silverharp

I am just amazed that the US gets away importing more then $700bn per year more then it exports, the biggest US export seem to be dollars!
The inflation rate is also much higher then reported, as there are all kinds of adjutments made to the inflation calculations like hedonics and substitution.

aidan24326

Read an intersting article recently (will link to if I can find it) written by an economics prof from some Uni the US, about the US economy. He cliams that the whole idea of anything in the US economy being positive is just one big lie. That successive US government administrations have effectively been 'cooking the books' for years, with massive borrowing against trade deficits, and a national debt that is spiralling out of control (an estimated 7.8 Trillion Dollars - a mind boggling figure).

As silverharp says the biggest US export now is probably dollars. There is also a link to the whole middle east situation and America's interests in that region, their removal of Saddam etc., in that international trading of oil is mostly conducted in US Dollars, and it is of particular importance to the US that that remains the case. Iraq had, and Iran are now, revealed their intention to begin trading oil in Euros, and the article suggested this would have very negative repercussions for the US (for reasons I wouldn't fully understand as I'm not that well up on economics tbh)

democrates

Tracking leading indicators for "the economy" is a framed pursuit. How about a 'winners and losers' analysis of your society.

Manic Moran

Well, one of the good indicators is the unemployment rate, which, around here (Silicon Valley), has been improving rather a lot over the last two years or so, and particularly the last six months.

NTM

Black Swan

Indicators? What about demographics? Are they factored in when projecting the future trends? For example, the Baby Boomers (born 1946 to 1964) are nearing retirement, a huge, disproportionate number of people leaving the workplace and starting to cash in their equities? Who are in turn followed by the Baby Derth, or a disproportionately smaller generation of people to support the retiring Boomers?

silverharp

Manic Moran wrote:

Well, one of the good indicators is the unemployment rate, which, around here (Silicon Valley), has been improving rather a lot over the last two years or so, and particularly the last six months.

NTM

I believe unemployment is a lagging indicator, in California I heard that 1 in 50 people is a realtor, they maybe working but are they earning more or less commission this year then last?

unlawflcombatnt

sovtek wrote:

In fairness the housing bubble that is bursting as we speak doesn't look good and the Bushies have cooked the books before.

You've assessed it perfectly. And it seems the only honest assessments on the U.S. economy come from non-US journals and newpapers. Often, the articles are even written by Americans who couldn't get their articles posted in the Corporate-controlled American media.

As an American, I hope the rest of the world doesn't think that President Bush, and the virtual dictatorship he's created, represents the will or the views of the American people. Bush and his corruptocracy were fraudulently elected both times.

The massively dishonest reporting by the American media has kept many Americans misinformed not only Iraq, but the economy as well. Were it not for the American media's biased reporting, and Republican ability to rig the outcome of elections, Bush would have long since been thrown out of office, either by not be re-elected or impeachment.

Unless Bush is impeached, the United States and the World will have to endure 2 more years of his moronic leadership. Hopefully we can all survive 2 more years of his imcompetence and dishonesty. Bush will undoubtedly be remembered as the worst president in American history, and possibly the worst leader in all world history.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

_________________
The economy needs balance between the "means of production" & "means of consumption."

Manic Moran

On the housing market, a survey of housing constructors last month indicated that though the official construction numbers were not so good, they were of the belief that the industry was looking good and on the way up.

I believe unemployment is a lagging indicator, in California I heard that 1 in 50 people is a realtor, they maybe working but are they earning more or less commission this year then last?

Possibly, but I'm not a realtor, and I'm off the dole as of last June. I think that's a good sign!

NTM

Afuera

Manic Moran wrote:

On the housing market, a survey of housing constructors last month indicated that though the official construction officials were not so good, they were of the belief that the industry was looking good and on the way up.

In fairness, why would housing constructors say anything else? You've got to admire that optimisim though if they believe it's still on the way up from it's record highs.

Manic Moran

Well, if they went around prophesising doom and gloom for the housing markets, perhaps the government could intervene?

NTM