Leading Indicators – Signaling Growth If You Look

The leading indicators were seen as a disappointment this week, just as the jobs and house numbers were also taken as lousy reports. We agree that the housing numbers were nowhere near anything that we would say a positive comment about. But, the leading indicators could be much different indeed.

Much of the headline action was focused on the miss versus expectations. Unfortunately, there is not much room to put more than a few words to catch reader’s attention so that is the best they can do.

But the growth is on and the recent slowdown seen in April was probably a short-term aberration. The latest release also showed a large tick down for equity markets as we already knew. But the deep move by stocks during May was enough to cause the indicator to still grow, but less than it would with a less severe market environment.

So, all in all, not so bad. Let’s keep a sharp lookout for the next report and see if that helps to change or improve the trend.

Comments from Briefing.com:

Leading Indicators Return to Positive Growth

The Conference Board’s Leading Indicators Index reversed directions and increased 0.4% in May after failing to grow in April. The Briefing.com consensus called for the index to increase 0.5%.

Since seven out of 10 index components are known prior to the release, the slight downward surprise will probably not result in any market reaction.

Oddly, like last month, the missed prediction was probably not due to the three estimated components of the index. Orders of nondefense capital goods excluding aircraft were estimated to have fallen in May and contributed -0.06% to the index. The drop is in-line with the recent negative trend in domestic business investment expenditures. Consumer goods orders and M2 supply both contributed positively, however. The M2 component pushed the index up 0.27%, its highest level of contribution since December 2008.

The index suffered from the downturn in the equity market. The stock price decline weighed down the index by 0.23% and tied for the worst performing month since February 2009.