ECRI Leading – Will They Predict?

March 18, 2010 1:29 pm

The leading indicators rose again as a sign that recovery continues. What else is there to say? Look closer at the ECRI and see how the shorter term indicator is shaping up….

Feb Leading Indicators +0.1% vs. +0.1% consensus

From Briefing.com (prior to release)

The Conference Board’s Leading Indicators Index is expected to post a 0.1% increase in February after rising 0.3% in January. A 0.1% growth rate would be the lowest increase since the index turned positive in April 2009.

Since seven of 10 components of the index are known prior to its release, the market tends to not trade heavily on minor differences between the actual and consensus numbers.

Out estimate is slightly more pessimistic than the consensus median estimate.

January’s factory shipments and trade data showed that 44.6% of shipments of nondefense capital goods excluding aircraft were destined for exports. In order for investment growth in equipment and software to prosper, the ratio needs to fall back to around 40%.

We believe that the strengthening of the dollar (Federal Reserve’s broad trade-weighted index rose 1.6% in February), will hinder growth in foreign orders. Since domestic firms seem unable to pick up the slack, our estimates show a further deterioration in orders of nondefense capital goods excluding aircraft.

As a result, we expect the leading indicators index to post zero growth in February . However, a slight decline is also very possible.

From Bloomberg:

The Conference Board’s index of leading economic indicators, due out on March 18, may show a 0.1 percent gain in February after increasing 0.3 percent the prior month, according to the median forecast of economists surveyed by Bloomberg. It would mark the 11th consecutive advance.

The Conference Board’s Leading Indicators Index is expected to post a 0.1% increase in February after rising 0.3% in January. A 0.1% growth rate would be the lowest increase since the index turned positive in April 2009.

Since seven of 10 components of the index are known prior to its release, the market tends to not trade heavily on minor differences between the actual and consensus numbers.

Out estimate is slightly more pessimistic than the consensus median estimate.

January’s factory shipments and trade data showed that 44.6% of shipments of nondefense capital goods excluding aircraft were destined for exports. In order for investment growth in equipment and software to prosper, the ratio needs to fall back to around 40%.

We believe that the strengthening of the dollar (Federal Reserve’s broad trade-weighted index rose 1.6% in February), will hinder growth in foreign orders. Since domestic firms seem unable to pick up the slack, our estimates show a further deterioration in orders of nondefense capital goods excluding aircraft.

As a result, we expect the leading indicators index to post zero growth in February . However, a slight decline is also very possible.

The Numbers:

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