MW: Leading indicators show recession bottoming out
By Rex Nutting,
WASHINGTON (MarketWatch) - The U.S. recession is bottoming out and a recovery is near, economists for the Conference Board said Monday after reporting that the index of leading economic indicators rose 0.6% in August, the fifth straight increase.
The coincident index - designed to measure current activity - was flat in August after an upwardly revised 0.1% gain in July, the private research organization said.
Five of the 10 leading indicators improved in August, and two others were unchanged.
The positive contributions came from supplier deliveries, the interest rate spread, stock prices, building permits and consumer expectations. The biggest negative contributions to the index came from the real money supply, jobless claims and capital goods orders. The factory workweek and consumer goods orders were unchanged in August.
The leading indicators rose an upwardly revised 0.9% in July vs. 0.6% previously reported. The 0.6% increase in August was weaker than the 0.7% increase expected by economists surveyed by MarketWatch.
"These numbers are consistent with the view that, after a very severe downturn, a recovery is very near," said Ken Goldstein, economist for the organization. "But the intensity and pattern of that recovery is more uncertain."
The leading indicators had fallen for 20 consecutive months before turning higher in April. "Its gains have become very widespread," said Ataman Ozyildirim, an economist for the Conference Board. The leading indicators are designed to forecast economic activity about six to nine months ahead.
Over the past six months, the leading index has risen 4.4% after falling 2.4% in the previous six months. Eight of the 10 indicators have improved over the past six months.
The coincident index has fallen 2% in the past six months, with none of the four indicators showing improvement.
Three of the four coincident indicators improved in August - industrial production, personal incomes and business sales. The fourth coincident indicator - nonfarm payrolls - fell. Personal incomes and sales were estimated by the Conference Board.
The four coincident indicators are the same ones used by the National Bureau of Economic Research to judge whether the economy is growing or contracting. The NBER is not expected to make a ruling about the end of the recession for several months.
