It’s hardly a surprise to anyone who’s been following the economic news of late. But even if it’s just the latest confirmation of what’s already become clear in recent weeks, the soaring state of the Conference Board’s index of leading indicators is a sober reminder that the economy won’t easily be dragged into a slowdown anytime soon.
The Conference Board yesterday reported that its U.S. leading index jumped 1.1% last month, surprising economists by a fairly wide margin. The consensus estimate called for a rise of less than half of what was reported, according to TheStreet.com. In addition to being among the highest monthly advances in some time, it’s the fifth gain in the last six months. The implication: economic growth in the future will stay robust.
Among the catalysts moving the leading indicators higher: the fading of weekly claims for unemployment insurance. It’s old news in late February that the labor market has found a new head of steam. Old, but the trend still warrants attention if only because employment strength carries so much influence over the economy overall. That includes Joe Sixpack’s thinking on whether he’ll keep spending more within the temples of consumerism, otherwise known as malls and other retail outlets.

The bond market yesterday took notice of the strong report, retracing some of the yield dip that came on Monday. And for good reason, as it was hard not to smell the fear of additional interest-rate hikes looming in the wings.
Meanwhile, it was find economists talking up the expectation of a stronger economy in the spring, and thereby putting a spike through the heart of the first estimate of the fourth-quarter’s sharply slowdown in GDP growth.
Still, some suspect that all the good news so far in 2006 is something less than sustainable. Skeptics are quick to point to the fact that last month was the warmest January on record, which was one reason why economic activity has surprised with strength. Perhaps. As always, additional data will be necessary for confirmation or denial.
Traders of Fed funds futures, however, aren’t inclined at the moment to wait around for additional smoking guns. Selling of the the July ’06 Fed funds contract was sufficiently brisk to translate into an expectation of 5.0% Fed funds, based on yesterday’s close–50 basis points above the current rate (hint, hint).
Surprises have been everywhere in recent years, from interest rates to consumer spending to the persistent buying of dollar-based assets by foreigners. What seems logical and imminent has quite often turned out to be wrong. Even the greenback’s supposed collapse has been put on hold, causing dismal scientists of a certain persuasion to scratch their heads and go back to the proverbial drawing board. The American growth machine appears to be the latest candidate to confound, mystify and bewilder the pessimists.
Anything’s possible in the global economy of the 21st century, with the possible exception of figuring out what comes next.