Leading Economic Indicators Decline

The decrease in the leading economic indicators, for the second month in a row, is more evidence of a coming economic slowdown.

Sept. 21 (Bloomberg) — The index of U.S. leading economic indicators fell 0.2 percent in August for a second straight month, signaling the slowdown in the economy will continue into early 2007.

The decline is due to declines in both housing permits, which I noted earlier, and a decline in consumer optimism.

“The evidence for slower growth over the next year is becoming overwhelming,” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report. “Recent weakness in the index suggests further slowing in economic growth in the months and quarters ahead.”

The index fell at an annual rate of 1.2 percent in the last six months. It would take a 3.5 percent annualized decline to signal contraction in the economy, according to the Conference Board. The last time the index met that criterion was in September 2000, six months before the start of the last recession.

So when Bush says that the economy is strong and the outlook is favorable keep this kind of data in mind. While indeed the economy is not currently in a recession, things do appear to be slowing down.

FILED UNDER: Economics and Business,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Fersboo says:

    2/10ths of a percent. Whoa, ease up off the brakes there!

  2. Wayne says:

    I slow my car down last weekend from 140 mph to 120 mph. My car was still going plenty fast.

    Steve it seem that you keep implying we are heading for a recession or at least a bad economy. If not then what are you trying to say?

    They economy can slow down and still be a strong economy. Yes housing starts are down but there are other indicators that have increase. Check links below. I believe that if fuel prices continue to drop it will have a very large positive influence on the economy. Most important is if we could get a good energy policy through the filibuster Senate, it will greatly help the economy. Companies like to be able to make long-range plans and without an assurance that there will be sufficient energy in the future it can make that difficult.

    http://www.examiner.com/a-279510~IMF_Chief__Basic_Economic_Outlook_Good.html

    http://www.census.gov/cgi-bin/briefroom/BriefRm

    http://www.examiner.com/a-279510~IMF_Chief__Basic_Economic_Outlook_Good.html

  3. MrGone says:

    Perhaps it’s like many say, people ‘feel’ the economy much sooner than pundits ‘see’ it. Maybe this is why the administration doesn’t understand why people don’t get that the economy is doing so great. They get it just fine.

  4. Steven Plunk says:

    Would falling gas prices bring consumer confidence back up enough to offset the decline in housing starts? Also, given that crude prices are falling, and crude is used in many other products besides gasoline, do you think we will see less pressure on inflation allowing a reduction of interest rates?

  5. Steve Verdon says:

    Steve,

    It is possible, but it is also possible that the decline in gasoline prices is bad news in that the declines are pretty steep. If part of that decline is due to declining economic activity, then the price decline isn’t simply a good thing.

    Wait and see, what the next couple of months say.

  6. McGehee says:

    but it is also possible that the decline in gasoline prices is bad news in that the declines are pretty steep.

    The declines strike me as a correction of some pretty steep price increases from last year — and prices still haven’t gotten all the way back down to what they were before Katrina. If the fuel prices from which we were declining were a natural position for the economy, that would be one thing.

    This is — mostly, at least– another.

  7. Steve Verdon says:

    Why is it everything is a “correction” with the conservative leaning crowd? Seems if anything this argues for a far more interventionist approach to markets…which strikes me as not being very conservative.