The Commerce Department's Composite Index of Leading Economic Indicators [LEI] decreased by 0.1% in September to 101.1. This was in spite of the fact that 7 out the 11 indicators making up the Index had gained for the month. The Index estimate for August was revised downward from a gain of 0.2% to a gain of 0.1%. Last year the LEI had losses in only 3 months and ended the year with a 1.8% gain. By way of contrast, for the first nine months of this year, the index has had 6 losses and is down by 1.5%. The Index has dipped to the 101.1 level three times in the last five months. The previous two times it bumped up to a higher level in the following month. Perhaps it is leveling off. We'll be watching the LEI with great interest to see if it will begin to move back up in the coming months.

My personal favorite among the Commerce Department's composite indexes is the often-overlooked Composite Index of Coincident Economic Indicators [CEI]. The CEI is assembled from 4 indicators that have been found to hit their highs and lows roughly coincident with peaks and troughs in general economic activity. The CEI has had only one losing month in the last 24 months. During 1994 it gained 5.0%. Through September of this year it has risen at an annualized rate of 2.0%. For the third quarter it rose at an annualized rate of 3.2%. Note that this is almost identical to the low estimate for the final third quarter GDP mentioned in the 10/27 edition of Economic Indicators.

In another Commerce Department news release today it was announced that new construction put in place during September was up 1.0% from August. For the year to date total new construction expenditures have risen at an annualized rate of 7.39%. For the third quarter, total construction rose at an annualized rate of 12.41%. So, it looks like the construction sector is contributing more than its fair share to the growth of the economy.

In other news today the National Association of Purchasing Managers [NAPM] released the October figure for its monthly index of the status of manufacturing companies. The October number was 46.8, down from the September figure of 48.3, and nearly the same as the August reading of 46.9. An NAPM Index reading of more than 50 signifies that the manufacturing sector of the economy is expanding. Readings between 44 and 50 are interpreted to mean that the manufacturing sector is slipping, but the overall economy is increasing. Readings below 44 signify recession. Analysts attribute the slack in the manufacturing sector to excessive inventories that still need to be worked down. This is consistent with recent high values for the inventory growth rate and the recent downtrend in capacity utilization [See Economic Indicators for 10/16 and 10/17].

Byline: Lafferty (MF Merlin)