Economic Blog
Leading economic indicators finally received the jolt we have been expecting.
The Conference Board’s Leading Economic Index (LEI), a composite of leading data series, rose 0.8% month over month in January, ending a string of lethargic readings. As shown in the LPL Chart of the Day, the LEI rose 0.9% year over year, signaling a potential bottom in the series and pointing to economic growth.
The LEI, which we include as one of the “Five Forecasters” of our Recession Watch Dashboard, has yet to turn negative this economic cycle, even though it has come close over the past few months. That threshold is important, as the index has fallen negative year over year before all nine recessions since 1955.
In addition to the headline number, the breadth of the increase among the LEI’s 10 components impressed us. Eight subcomponents were positive contributors, a sharp increase from recent months, including a strong reversal of previous weakness in initial jobless claims that we suggested at the time was likely the result of seasonal volatility and calendar quirks.
Weakness was concentrated in the manufacturing sector, where the Institute for Supply Management (ISM) New Orders Index acted as a negative contributor, and average weekly manufacturing hours came in flat. We have maintained that manufacturing, the biggest weak spot in the domestic economy, will likely take several months to recover now that a partial trade deal has been agreed to with China.
“Stocks have been signaling that investors believe the domestic economy is bottoming,” said LPL Financial Chief Investment Strategist John Lynch. “We are pleased that the economic data is beginning to corroborate that view, though the knock-on effects of the coronavirus may delay the process.”
IMPORTANT DISCLOSURES
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This Research material was prepared by LPL Financial, LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value
For Public Use | Tracking # 1-954355