Leading Economic Indicator

Economic indications have been strengthening going into QE2 (Nov 3, 2010), gains reflected by two strong back-to-back 0.5 percent gains for the Conference Board's index of leading economic indicators (September revised from plus 0.3 percent). A wide yield spread continues to be the biggest positive though to a smaller degree given declines underway in long rates, declines triggered and furthered by QE2. A rise in money supply, also related to QE2, is an increasingly significant plus. Another central positive is the factory workweek, strength that is likely to continue given the uplift underway in the manufacturing sector.

Other readings in today's report include a 0.1 percent uptick in the coincident index, a small gain that follows two unchanged readings in a reminder of the economy's mid-year soft patch and the contrasting acceleration now underway.

Is the Stock Market Topping ?

This question is sometimes on my mind. How long before another turn of the market to a new cycle, currently to a new bear market cycle, a continuation of a secular (broad) bear market that began in 2000. Are there signals I can use to help me be alert to a looming change? Today on Financial Sense I read a very good description of the kind of simple indicator that can be easily employed. The article is written by, yep, Chris Puplava. (Are you reading Financial Sense.com?) Here is a link to Market Tops Are a Process, Not an Event.

A Pair of 2010 Outlooks From Different Perspectives

Leading economic indicators are numerous and important tools for analysis of economic trends. I understand their importance and will create a scheme to monitor some of them while I learn more about their applications. In exploring the site of the Economic Cycle Research Institute (ECRI), I discovered a video clip from December 31, 2009 of a CNBC interview of Lakshman Achuthan from ECRI and Patricia Chadwick from Ravensgate. Here is a link to the CNBC Video, the title is Market Task Force. They are making 2010 outlooks coming from two different perspectives, empirical economic indicators (ECRI) and fundamental analysis with an emotional reality factor (Ravensgate). Despite these different approaches, they may arrive at the same place.

Housing Starts, a leading indicator

This was found at Bloomberg yesterday:

Housing starts looked good for November but most of the gain was largely a comeback and then some in multifamily starts-a volatile component. The single-family component posted only a partial rebound. Construction companies picked up the pace of groundbreaking for new homes as housing starts in November rebounded 8.9 percent, following a revised 10.1 percent plummet in October. The November pace of 0.574 million units annualized came in right at the market forecast for 0.575 million units and was down 12.4 percent on a year-ago basis. The latest comeback was led by a 67.3 percent rebound in multifamily starts, following a sharp 29.5 percent plunge in October. Meanwhile the single-family component edged up 2.1 percent after a 7.1 percent fall the month before.

A housing start is registered at the start of construction of a new building intended primarily as a residential building. The start of construction is defined as the beginning of excavation of the foundation for the building.

Industrial Production measures are updated today

The Federal Reserve has updated it series on industrial production today. A quick look at the updated graph of the index value and we can see there is life returning in this leading indicator. Keynesian's say this is also one of the leading indicators of inflation.

click on the graph for a larger view

Yahoo News is reporting on the Fed update, here is a small piece of their report:
 Stronger activity at mines led last month's increase in industrial production, rising 2.1 percent. The manufacturing sector — the biggest chunk of industrial output — rose 1.1 percent. Utilities fell 1.8 percent, according to the Fed report.

The portion of industrial capacity in use rose to 71.3 percent, from 70.6 percent in October. It shows that factories, mines and utilities are using more of their plants as the recovery takes root. But capacity use remains far below the 80 percent level that existed for part of the past decade.

This update does not show me a reason to change my current outlook position, which is slow to no economic growth and unemployment remaining above 10% for most of 2010.