Thursday, September 23, 2010

Leading indicators still point to growth


The Leading Indicators index rose a bit more than expected, and as the chart shows, the year over year change remains quite positive—a good indication that the economy is still growing. There is nothing in this series that would even suggest that the economy is slowing enough to qualify as the "double dip" recession that remains an obsession with so many observers. Instead, the index is behaving exactly at it has coming out of every recession in the past. It's natural for the growth in the index to slow as the economy continues to expand.

3 comments:

Buddy R Pacifico said...

It is interesting that according to the chart the indicators reach their highs at the beginning of each decade (ex. the mid 70's). I'm not sure why but probably becuase the U.S. is such an optimistic country that malaise can't survive the excitement of a new decade.

jason said...

Isn't the "recovery" in bond prices a result of the large retail inflow to bond funds?

Scott Grannis said...

The recovery in Treasury bond prices (i.e., the decline in bond yields) is best thought of as a sign of great risk aversion among investors. Retail investors flocking to Treasuries would imply fear of the future and distrust of equities.

The recovery in corporate bond prices is a sign that default risk has declined significantly.