Leading Economic Indicators

The Conference Board’s measure of Leading Economic Indicators fell 0.7% in July, its worst monthly decline since August of 2007.
It also experienced a 3.3% year-over-year decline, the worst since April 2001, and most of the drop can be specifically linked to the malaise in the housing market. While housing starts continue to fall on a month-over-month basis (even though the rate of decline seems to have slowed), the economic outlook remains relatively bleak, despite the recent respite from higher oil prices. Jack Ablin, chief investment officer at Harris Bank, notes that the stock market tends to follow the LEI index reasonably closely (even though the S&P 500’s performance is one of the components of the LEI). “This morning’s number is another nail in the coffin for stocks in the near term,” Mr. Ablin writes. “U.S. equities need a catalyst, like tightening credit spreads, lower crude oil prices or a stronger dollar, to move higher.”