Leading Economic Indicators Rise for 10th Straight Month

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In another good sign for the U.S. economic recovery, the Index of Leading Economic Indicators rose 0.3% in January, The Conference Board announced Thursday -- its 10th straight monthly increase, though a smaller one than had been forecast.The consensus of economists surveyed by Bloomberg News had been for the index to rise 0.5% in January after a revised 1.2% rise December, and a 1.1% increase in November. The LEI index now stands at 107.4. (Base year, 2004 =100.) Further, five of the 10 indicators that comprise the LEI increased in January.

Separately, another closely watched indicator of the U.S. economy showed a slight increase: The Federal Reserve Bank of Philadelphia's Manufacturing Survey, commonly known as the Philly Fed Survey, rose to 17.6 in February, from a revised 15.2 in January, 22.5 in December, and 16.7 in November. Readings above zero indicate the economy is expanding; numbers below zero indicate that it's contracting. Economists surveyed by Bloomberg News had expected a 17 reading for the February Philly Fed Survey.

Ongoing Expansion Seen

Concerning the January Leading Economic Indicators report, Ken Goldstein, economist for The Conference Board said in a statement, "The cumulative change in the U.S. LEI over the past six months has been a strong 9.8%, annualized. This signals continued economic recovery at least through the spring."

Meanwhile, The Conference Board's Coincident Economic Index for the U.S. rose 0.2% in January, following no change in December and an 0.3% increase in November. The Conference Board Lagging Economic Index declined 0.1% in January, after an 0.3% decrease in December, and an 0.7% decline in November.

Further, during the six-month span through November, the leading economic index increased 4.8%, according to The Conference Board's methodology. That's down slightly from the 6.2% increase for the previous six months. However, it also said the strengths among the leading indicators "have remained very widespread in recent months."

The Leading Economic Indicators index is designed to forecast likely economic conditions six to nine months out, although economists caution that the LEI is a general, multi-variable indicator, vulnerable to revisions. Hence, investors should use it as a rough gauge of overall macroeconomic trends -- not as a metric that precisely pinpoints economic cycle turns.

The bottom line for investors? The 10-month uptrend for the LEI telegraphs a strengthening economic expansion, with fundamentals improving nearly across the economy. The one wild card? Job growth, which historically lags the economic recovery. Sustained, monthly job growth would create a self-perpetuating expansion. Based on current trends, job growth could start as early as March, or even February.
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