Several years ago there was a guy who appeared from time to time on the Tonight Show and made wacky predictions about things to come. I forget his name. [If anybody out there remembers it, please E-mail me]. Anyway, he always said the same thing before launching into his forecasts. It went something like this, "Everybody is interested in the future because that's where we all will be spending the rest of our lives." A similar statement can be made concerning the economy: "Everybody is concerned about the future because that's where we all will be earning and spending money for the rest of our lives." Anxiety about the future has led economic necromancers to search for signs and portents of future economic activity. And, they've been pretty darn successful. What they've come up with are a number of measures of economic activity that tend to reach their cyclical peaks and troughs before those of the overall business cycle. These harbingers of the economy are known formally as Leading Economic Indicators.
The Department of Commerce has taken the prognosticating process one step further in creating its Composite Index of Leading Indicators [LEI for short]. The LEI combines a balanced selection of 11 of the best leading economic indicators. Combining the indicators into an index tends to cancel out some of the erratic movements of the individual indicators while reinforcing their common cyclical behavior.
This morning the Department of Commerce reported on the status of the LEI for the month of August. Today's LEI reading of 101.2 was 0.2 higher than July's reported value. From the middle of 1993 to early this year the LEI was in a general upward trend. But, it declined every month in the four month period from February to May. Two out the last three monthly LEI changes have been to the upside. So, we may be now be seeing a turnaround and, if not a resumption of the uptrend, at least a leveling off of the indicator. Could it be that this soft landing stuff really works?
In other news, orders for manufactured goods [aka Factory Orders] were up 2.6% for August, the best performance in 9 months. This ties in with last week's report of an unexpectedly large increase in new orders for durable goods. As I said last week, this is good news for the economy. The orders wouldn't be picking up if there wasn't somebody out there buying stuff faster than the manufacturers were producing it.
Finally, late this afternoon, Ford Motor Company reported its domestic sales results for September. Sales of cars were down 16.8% from the same period a year ago. Sales of light trucks were down 0.7%. The year-to-year sales decline was attributed to the combination of a strong incentive sales program last year and a temporary drop in inventory this year during the transition to the new model year.
How did the markets respond? Pretty much the same as yesterday. The bond market perceived a climate of slow to steady growth and prices rose a little. The DJIA closed down 9.03.