Retailer Daily

Leading Economic Index Rises 12 Straight Months - Update

The Conference Board Leading Economic Index (LEI) rose for the 12th consecutive month [pdf] in March 2010. The LEI rose 1.4% last month, breaking a trend of only growing by a fraction of a percentage point which had lasted for several months. The LEI, which measures economic activity for the next six months, rose from a revised score of 108.1 to 109.6. Between September 2009 and March 2010, the LEI rose 5.2% (a 10.6% annual rate), slightly slower than the increase of 6.2% (12.8% annual rate) for the previous six months. However, the strengths among the leading indicators have remained widespread in recent months. The LEI declined for 20 straight months before starting its current streak of increases in April 2009.

CEI Rises Fractionally

In addition, the Coincident Economic Index (CEI), which measures current economic activity, rose 0.7% in March 2010, from 100.1 to 100.2. The CEI has been rising since November 2009. A score of 100 marks the performance level of both the LEI and CEI in 2004.

Improvement in Employment and Income Needed to Accelerate Growth

According to the Conference Board, the LEI’s continuing growth points to a slow recovery that should continue for the next few months. According to Conference Board economist Ken Goldstein, to accelerate economic recovery past its current sluggish pace, further improvement in consumer employment and income will be necessary. “Strength of demand remains the big question going forward,” said Goldstein.

Consumer Reports Index Suggests Difficulties in the Face of Jobs

The April 2010 Consumer Reports Index suggests that consumers are experiencing increased economic difficulties even as the employment picture improves . The Employment Index, which examines the change in employment of those that reported starting a new job, entered positive territory for the first time since May 2009. The Employment Index now stands at 50.4 (with a score more than 50 representing positive job growth), compared to 48.7 in both March and February 2010. In the past 30 days, 5% of Americans reported losing their job, compared to 4.3% in March 2010. The 5% reporting starting a new job is up from 3.5% the prior month, but behind the recent high point in September 2009 (6.2%). In addition, The Consumer Reports Past 30-Day Retail Index for April 2010, which reflects the purchases consumers made in March 2010, is at 10.4, slightly down from 11.1 in March 2010 (representing February purchases) and 10.9 in February 2010, but flat compared to 10.4 in April 2009. This number stands firmly at pre-holiday levels, indicating that consumers are not currently engaging with the economy. However, the Next 30-Day Retail Index, which reflects the purchases consumers plan to make in April 2010, is at 8.3, which up slightly from 7.3 the previous month and substantially better than 6.7 in April 2009. This indicates that confidence may gradually be emerging and real improvement in retail may materialize in the coming months.

LEI Breakdown

The LEI is a composite of 10 U.S. economic indices:

• Average weekly hours, manufacturing.
• Average weekly initial claims for unemployment insurance.
• Manufacturers' new orders, consumer goods and materials.
• Index of supplier deliveries – vendor performance.
• Manufacturers' new orders, nondefense capital goods.
• Building permits, new private housing units.
• Stock prices, 500 common stocks.
• Money supply.
• Interest rate spread, 10-year Treasury bonds less federal funds.
• Index of consumer expectations.

In March 2010, indices for the interest rate spread, the average workweek, supplier deliveries and the stock market made the largest positive contributions to the index.