US leading indicator gained in Dec but not significantly

26 January 2009 16:10  [Source: ICIS news]

WASHINGTON (ICIS news)--A closely watched business bellwether showed slight improvement in December, but the Conference Board said on Monday that the modest 0.3% gain in its index of leading economic indicators does not signal a recovery.

The New York City-based business analysis group said the December increase in its leading economic index (LEI) was significant in that it was the first upward movement in that measure for about 18 months.

However, Ken Goldstein, economist at the 92-year-old organisation, said the December gain was very modest and showed just how moribund the US economy was despite a range of government stimulus measures.

“It is good that December shows a positive 0.3% increase instead of a negative 0.3%,” Goldstein said.

“But it also is a measure of how weak the economy is, even with all of these effort to stimulate consumers and business,” he added.

The leading economic index is made up of ten economic measures.  Four of those showed increases in December, including improvements in the real money supply, low interest rates, new orders for consumer goods and manufacturers’ orders for non-defence capital goods.

Goldstein noted, however, that much of December’s 0.3% gain was credited to efforts by the Federal Reserve Board - the US central bank - to flood the country with cheap credit and lots of dollars.

“The gains in consumer goods and manufacturers’ orders were very, very slim in December,” Goldstein said, “and the LEI improvement is due chiefly to the near zero interest rate the Fed has set and the fact that they’ve got the mint printing presses running double shifts.”

He said that the fact that the LEI had not responded more positively to the increased money supply, record low interest rates and the federal stimulus package “tells us clearly that the recession has an awful lot of momentum behind it, and we’re not likely to see any real improvement before the second half this year”.

Despite those modest gains in consumer goods and capital equipment orders, he said, “if you look almost anywhere else - labour, general industry, stock prices, housing, automotives - you see bad news”.

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By: Joe Kamalick
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