Leading Economic Indicators Rise 1.4% In March

The Index of Leading Economic Indicators rose 1.4% in March, The Conference Board announced Monday -- its 12th straight monthly increase and further evidence that the U.S. economic recovery is well under way.

Economists surveyed by Bloomberg News had expected the index to rise 1% in March after rising 0.4% and 0.6% in February and January, respectively. The LEI index now stands at 109.6.

Ken Goldstein, economist for The Conference Board, said the index points to a slow recovery, with demand the key wild-card factor. "The indicators point to a slow recovery that should continue over the next few months. The leading, coincident and lagging series are rising," Goldstein said in a statement. "Strength of demand remains the big question going forward. Improvement in employment and income will be the key factors in whether consumers push the recovery on a stronger path."

The Conference Board's Coincident Economic Index for the U.S. rose 0.1% in March after and an 0.1% rise in February, and its Lagging Economic Index increased 0.2% after an 0.3% increase in February.

However, the six-month change in the index continued to show a slightly less intense recovery through March than the previous six months, with the index rising 5.2%. That's down from the 6.2% increase for the previous six months through September 2009. Still, the Board also said the strengths among the leading indicators "have remained widespread in recent months."

Seven of 10Components Rise

Returning to the March data, seven of the 10 indicators that comprise the LEI increased in March: interest rate spread, average weekly manufacturing hours, the index of supplier deliveries (vendor performance), stock prices, building permits, average weekly initial claims for unemployment insurance (inverted), and manufacturers' new orders for consumer goods/materials. Three fell: real money supply, manufacturers' new orders for non-defense capital goods, and the index of consumer expectations.

The LEI index is designed to forecast likely economic conditions six to nine months in the future, although economists caution that it's 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 can precisely pinpoint turns in economic cycle turns.

Concerning the year-long LEI trend, the length of the rise demonstrates that the U.S. economic recovery is taking hold. However, while most fundamentals are improving, employment and income will have to grow in the months ahead to both maintain the index's upward trend and confirm that the recovery is capable of sustaining itself without further fiscal stimulus.