This morning’s update of the Conference Board’s leading economic index (LEI) shows a modest gain last month. But let’s be clear: The increase is neither unexpected nor a sign that economic growth is imminent.
As we discussed last week, monetary stimulus these days is in overdrive, and to an extraordinary degree. In turn, that boosts the upside bias of most statistical measures designed to anticipate future economic activity, including the Conference board’s LEI as well as our own gauge of the future. Normally, this boost would offer strong reason to think that a rebound is near in the economy. But given the depth of the economic challenges, even unusually potent levels of monetary stimulus aren’t delivering the usual punch.
The Conference Board’s leading economic index “rose modestly in December, mainly due to the continued and very large positive contribution from real money supply,” the organization’s press release explains. “The yield spread also contributed positively to the index, helping offset the continued declines in building permits, the average workweek, supplier deliveries, and initial unemployment claims.”