Electrical Marketing's Leading Economic Indicators

June 26, 2009
Leading indicators looking more bullish in May. One of the most closely watched leading indicators for U.S. economic growth may be enjoying a sharp rebound

Leading indicators looking more bullish in May. One of the most closely watched leading indicators for U.S. economic growth may be enjoying a sharp rebound. The Conference Board Leading Economic Index for the U.S. increased 1.2 percent in May, following a 1.1 percent increase in April and a 0.3 percent decline in March. Says Ken Goldstein, an economist at The Conference Board, New York, “The leading economic index increased for the second consecutive month and the coincident (current) economic index is still declining, but the declines are less intense. Confidence is rebuilding and financial market volatility is abating. Even the housing market appears to be stabilizing. If these trends continue, expect a slow recovery beginning before the end of the year. However, employment will take longer to turn around.”

Purchasing Managers Index still negative but enjoys a solid increase over April. With a 2.7 increase in May, the Purchasing Managers Index has jumped 6.5 points since March. While the current 42.8-point mark still indicates a declining economy and is below the 50-point growth mark, Norbert J. Ore, chairman of the Tempe, Ariz.-based Institute for Supply Management’s Manufacturing Business Survey Committee, says there are economic reasons for optimism. “While employment and inventories continue to decline at a rapid rate and the sector continued to contract during the month, there are signs of improvement,” he said. “May is the first month of growth in the New Orders Index since November 2007, with nine of 18 industries reporting growth. New orders are considered a leading indicator, and the index has risen rapidly after bottoming at 23.1 percent in December 2008.”

Single-family building permits bounce off bottom of housing market. In a normal economic environment, a 408,000-unit seasonally adjusted annual pace for building permits would not be any cause to cheer. But because building permits had registered five straight months below 400,000, May’s number — a 7.9 percent increase over April — was welcome news for builders. As a point of perspective, during the housing market’s go-go years from 1996 to 2006 permits cruised along at a million-plus seasonally adjusted annual pace.