​The leading economic indicators index rose 0.3% in July from the prior month following a 0.6% increase in June. The increase matched the consensus forecast. Compared to a year ago, the index was up 3.9%, slightly less than June’s 4.1% pace. Over the six month period ending in July, the index was up 2.3%, down slightly from the 2.6% rate of growth in the six months ending in June.

The interest rate spread between the 10-year Treasury yield and the Federal Funds rate led the way in July, contributing 0.13 percentage points to the growth in the index. Although this was the smallest contribution from this component since last August as the spread has narrowed, this component has still contributed the most to the rise in the index over the past six months. The ISM new orders index came in second, contributing 0.10 percentage points as the index remained on the upper end of the recent range in July. Consumer expectations for business conditions contributed 0.09 percentage points, a nice rebound from the weak contribution in June, likely driven by strong job growth. The stock market contributed 0.03 percentage points as the market continued its upward march despite political chaos. Another decline in average weekly jobless claims added 0.02 percentage points. Core capital goods orders and new orders for consumer goods contributed little to the index, while average weekly hours contributed nothing as hours were unchanged.           

​The only negative contribution came from building permits, which took 0.12 percentage points away from growth in the index as permits fell from 1.275 million units at a seasonally adjusted annualized rate in June to 1.223 million units in July. 

Although the interest rate spread is often among the largest contributors, its contribution has been trending slightly lower over the last few months as the Federal Reserve has been gradually raising the Federal Funds rate while the 10-year Treasury yield has come down as investors’ initial optimism about the new administration’s economic policies has been followed by some doubt about the chances for successful implementation.

​The 10-year Treasury yield has fallen further in August amid rapidly mounting political tensions both here and abroad. It is becoming increasingly clear that Trump is going to have a very difficult time getting his much sought-after pro-business agenda implemented, which bodes ill for stocks and the economy. 

​The leading economic indicators index rose 0.6% in June from the prior month following a downwardly revised 0.2% increase in May. The increase was better than the consensus forecast of a 0.4% rise. Compared to a year ago, the index was up 4.0%, far higher than May’s 2.7% pace. Over the six month period ending in June, the index was up 2.5%, up slightly from the 2.3% rate of growth in the six months ending in May.

Building permits led the way in June, contributing 0.21 percentage points to the growth in the overall index, as building permits rebounded from a very weak May to post a strong 1.254 million unit annualized reading for June. The ISM new orders index came in second, contributing 0.17 percentage points as the index rose to 63.5 in June from 59.5 in May. The interest rate spread between the 10-year Treasury yield and the Federal Funds rate was next, contributing 0.13 percentage points to the growth in the index. Although this was the smallest contribution from this component since July as the spread has narrowed, this component has still contributed the most to the rise in the index over the past six months. Consumer expectations for business conditions contributed just 0.06 percentage points, the smallest contribution for this component since November, as consumers have become more concerned that Trump’s pro-growth policies may not come to fruition as soon as previously thought, if at all. The contribution from the stock market held steady at 0.06 percentage points as the market rose slightly in June. For the fifth month in a row, core capital goods orders contributed virtually nothing in June.           

​The only negative contribution came from initial jobless claims, as average weekly claims rose to 244K in June from 240K in May.

Although the interest rate spread is often among the largest contributors, its contribution has been trending slightly lower over the last few months as the Federal Reserve has been gradually raising the Federal Funds rate while the 10-year Treasury yield has come down as investors’ initial optimism about the new administration’s economic policies has been followed by some doubt about the chances for successful implementation.

​Given slowing inflation, weak wage growth and signs of a possible top in housing, the Fed’s June rate hike appears a bit misplaced. However, the LEI is suggesting growth should pick up soon. It remains to be seen if inflation, and interest rates, follow suit.

​The leading economic indicators index rose 0.3% in May from the prior month following a downwardly revised 0.2% increase in April. The increase matched the consensus forecast. Compared to a year ago, the index was up 2.7%, more than April’s 2.2% pace. Over the six month period ending in April, the index was up 2.3%, up slightly from the 2.2% rate of growth in the six months to April.

The interest rate spread between the 10-year Treasury yield and the Federal Funds rate led the way in May, contributing 0.16 percentage points to the growth in the index. Although this ties April’s reading for the smallest contribution from this component since October as the spread has narrowed, this component has still contributed the most to the rise in the index over the past six months. The ISM new orders index contributed 0.08 percentage points as the index itself rose 2 points to 59.5 from 57.5 in April. Consumer expectations of business conditions also added 0.08 percentage points as consumers remain hopeful that economic policy changes will boost business and the economy. The stock market contributed 0.06 percentage points as the market continues to rise despite political uncertainty and signs of a slowing housing market. Jobless claims contributed 0.05 percentage points in May as average weekly claims fell to 239,700 from 243,000 in a sign of continued labor market strength. Core capital goods orders and average weekly hours contributed virtually nothing in May.           

​The biggest negative contribution once again came from building permits, the third time in the last four months this has been the case. Permits took 0.15 percentage points away from growth in the index as permits fell to 1.168 million units on an annualized basis in May from 1.228 million units in April. 

Although the interest rate spread is often among the largest contributors, its contribution has been trending slightly lower over the last few months as investors have been turning back to bonds as initial optimism about the new administration’s economic policies has been followed by some doubt about the chances for successful implementation and the possible impacts on the economy and earnings, especially surrounding the healthcare overhaul.

​Given slowing inflation, weak wage and job growth and signs of a possible top in housing, the Fed’s June rate hike appears a bit misplaced. Talk of trimming its balance sheet also seems to be coming at the wrong time.

​The leading economic indicators index rose 0.3% in April from the prior month following a downwardly revised 0.3% increase in March. The increase matched the consensus forecast. Compared to a year ago, the index was up 2.4%, less than March’s 2.7% pace. Over the six month period ending in April, the index was up 2.4%, up slightly from the 2.3% rate of growth in the six months to March.

The interest rate spread between the 10-year Treasury yield and the Federal Funds rate led the way in April, contributing 0.16 percentage points to the growth in the index. Although this is the smallest contribution from this component since October as the spread has narrowed, this component has still contributed the most to the rise in the index over the past six months. Jobless claims contributed 0.10 percentage points in April as average weekly claims fell to 243,000 from 250,200 in a sign of continued labor market strength. Consumer expectations of business conditions added 0.08 percentage points in the fifth straight solid month for this component. Average weekly hours contributed 0.07 percentage points as weekly hours rose slightly during the month. Following four very strong months, the ISM new orders index cooled and only added 0.04 percentage points. Recent strength in this component finally showed up in real production data for April as reported yesterday, so this pullback suggests real manufacturing activity could cool as we head into the early Fall.         

The biggest negative contribution came from building permits, which took 0.07 percentage points away from growth in the index as permits fell to 1.229 million units on an annualized basis in April from 1.260 million units in March. The stock market took away 0.01 percentage points as the S&P 500 fell to 2,359 from 2,367 amid rising political chaos and uncertainty emanating from the White House.

Although the interest rate spread is often among the largest contributors, its contribution has been trending slightly lower over the last few months as investors have been turning back to bonds as initial optimism about the new administration’s economic policies has been followed by some doubt about the chances for successful implementation and the possible impacts on the economy and earnings.

​First quarter GDP growth was a very weak 0.7%, which was predicted by the stalling in the LEI  in the second half of last year. The rise in the LEI over the last few months suggests that growth should pick up by the summer. 

The leading economic indicators index rose 0.4% in March from the prior month following a downwardly revised 0.5% increase in February. The increase was better than the 0.2% consensus forecast. Compared to a year ago, the index was up a solid 2.8%, an improvement over January’s 2.5% pace. Over the six month period ending in March, the index was up 2.4%, up slightly from the 2.3% rate of growth in the six months to February.

The big story in today’s report was the continued positive contribution from the ISM new orders index, which added 0.19 percentage points to the index, and has seen strong contributions for four straight months. During the last six months, this component has added 0.55 percentage points to the index, or 20% of the total growth. The interest rate spread contributed 0.19 percentage points in March. While its contribution over the last six months was greater than that for the ISM new orders component, it is not really a big story since it is almost always one of the biggest contributors. Another big story is the jump in consumer expectations of business conditions, which contributed 0.12 percentage points in March and has also seen four straight months of very strong contributions. The stock market also added support in March, but not as much as in December and February as investors have become a bit concerned about the probability of getting pro-business policies out of Washington, as well as uncertainty surrounding geopolitical tensions. Building permits increased in March, adding 0.11 percentage points.          

​The biggest negative contribution came from average hours worked, which took away 0.13 percentage points. Initial jobless claims subtracted 0.09 percentage points from the index as average claims rose to 250K in March from 243K in February.

Although the interest rate spread is often among the largest contributors, its contribution has been trending slightly lower over the last few months as investors have been turning back to bonds as initial optimism about the new administration’s economic policies has been followed by some doubt about the chances for successful implementation and the possible impacts on the economy and earnings. Geopolitical tensions have also buoyed bonds.

​First quarter GDP is looking to be quite weak, which was predicted by the stalling in the LEI  in the second half of last year. The rise in the LEI over the last few months suggests that growth should pick up by the summer.   

​The leading economic indicators index rose 0.6% in February from the prior month following a similar 0.6% increase in January. The increase was better than the 0.4% consensus forecast. Compared to a year ago, the index was up a solid 2.5%, an improvement over January’s 1.9% pace. Over the six month period ending in February, the index was up 2.3% after growing just 1.6% in the six months to January.

The big story in today’s report was the large negative contribution from building permits, which subtracted 0.19 percentage points from the overall index and was the only negative contribution. Building permits slid to 1.21 million in February from January’s 1.29 million, although housing starts rose sharply.

The biggest positive contribution came from the interest rate spread between the 10-year Treasury yield and the Federal Funds rate, which contributed 0.20 percentage points to the index. Although the interest rate spread is often among the largest contributors, its contribution has been trending higher over the last several months as investors have been selling bonds in anticipation of higher inflation and stronger economic growth supported by lower taxes, fewer regulations and heavy infrastructure spending under President Trump. The ISM new orders index also contributed 0.20 percentage points as the recent strength in manufacturing survey data continued. The ISM contribution to the overall index has been noticeably stronger in the last three months. Still, the contribution from actual non-defense orders excluding aircraft has been fairly weak during this same period. Initial jobless claims contributed 0.16 percentage points as claims averaged 237K per week in February, down from January’s 248K. A further rise in the stock market contributed 0.09 percentage points. The same indicators that contributed the most over the past month have also contributed the most to the index over the past six months.

​Over the past year, only the leading credit index has seen deterioration, while all other components have been improving. The strongest contributor recently has been the widening interest rate spread, which should help to boost lending as banks see wider interest margins on their loan products. This should help to lift overall economic activity. Still, it depends on how much demand there will be for loans. With manufacturing improving and job growth strong, the economy should find firmer ground soon; should being the operative word as productivity remains woefully weak.