Leading Economic Indicators Paint a Bleak Economic Future

By , Money Morning •

By Jennifer Yousfi
Managing Editor

The Conference Board announced yesterday (Thursday) that the Leading Economic Indicator Index fell for a second straight month.

The index fell 0.4% in November following a decline of 0.5% in October.  Analysts had predicted a 0.3% decline for the month. In the six-month period from May to November, the index dropped 1.2%, the largest six-month decline in the past six years.

"It’s certainly pointing to a slowdown," Roger Kubarych, chief U.S. economist at Unicredit Global Research in New York and a former Federal Reserve researcher, told Bloomberg. "The fourth quarter is going to be much weaker."

The index measures 10 separate leading economic indicators to give a broad picture of the economy as a whole. It is seen as a forecast of economic conditions to come over the next three to six months. Seven of the ten indicators were negative for November. The largest negative contributor was stock prices, a reflection of the recent volatility in the markets.
The Conference Board also released a coincident index and a lagging index, both of which were up 0.2% for the month of November. 

Also on Thursday, the Commerce Department’s released its final estimate of third-quarter GDP, which remained at 4.9%, the highest increase in four years. Contrary to the third-quarter’s record growth, the economy is only expected to grow at a 1% rate in the fourth quarter of 2007 and 1.5% in the first quarter of 2008, according to a recent Bloomberg News survey.
Also troubling for the economy, initial jobless claims rose for the week ending Dec. 15.  Economists consider jobless claims another leading indicator of future economic performance and fear the rise in claims is a sign of weakness in the job market. 

"If claims keep rising, [increases to] payrolls closer to zero will soon become a real possibility," said a research note from Ian Shepherdson, chief U.S. economist with High Frequency Economics Ltd., MarketWatch reported. "Companies’ behavior is fundamentally changing; a hiring freeze is no longer enough."

Taken individually, each of these economic indicators could be a signal of tough times ahead for the U.S. economy. But taken together, further slowing seems almost certain.

News and Related Links:

  • The Conference Board:
    November Press Release