The Bureau of the Census and the Bureau of Economic Analysis, through the Department of Commerce, announced today that total October exports of $66.7 billion and imports of $74.8 billion resulted in a goods and services deficit of $8.1 billion, $0.1 billion less than the revised September deficit of $8.2 billion. For the first 10 months of 1995 the total deficit was $98.03 billion. This translates into an annualized deficit of $117.64 billion -- the highest annual balance of payments deficit since 1987.

Today, for the first time, the Composite Index of Leading Indicators (LEI) was released by the Conference Board under its recent contract with the Department of Commerce. Today's report covered changes in the LEI and its component indicators during November 1995. Because of missing data due to the government shutdown, the Composite Index of Coincident Indicators (my personal favorite) and the Composite Index of Lagging Indicators could not be calculated.

Only eight of the eleven indicators that contribute to the LEI were available. Four were up and four were down. But, the cumulative magnitude of the downers exceeded that of the uppers with the net effect that the Index was down 0.3% on the month. This follows a drop of 0.5% in October. During the first eleven months of 1995, the Index dropped 7 times, rose twice, and was unchanged twice. Over the 12-month period ending in November, the Index dropped a total of 2.0%.

As in October, the sensitive materials price change index made the largest contribution to the drop in the LEI. In my December 6 article I remarked: "If there are still any federal policy makers who doubt that inflation is under control, they need to take a look at the trend in the change of prices for sensitive materials over the past eleven months." Two weeks later the Fed acted to lower short-term interest rates and Chairman Greenspan stated: "Since the last easing of monetary policy in July, inflation has been somewhat more favorable than anticipated." He added: "This result, along with an associated moderation in inflation expectations, warrants a modest easing in monetary conditions." Does Alan Greenspan read my daily articles? Wouldn't that be a hoot! More likely, we are both looking at the same data and drawing the same conclusions.

Vendor Performance (an index of the time required for delivering orders) made the second largest negative contribution to the November LEI. According to an April 6, 1995 article in the Wall Street Journal, this is one of the indicators that Chairman Greenspan watches closely for signs of inflation. A falling index means that economic growth is slowing. The Vendor Performance Index hit a peak value of 65.7 in December, 1994. Since then, it has been in a steady downtrend ending in November's reading of 45.8.

Speaking of the Fed, today it released its "Beige Book" report on economic conditions during the December/January time frame. According to reports, the Fed concluded that, during the reporting period, the economy grew at a modest pace, prices remained stable, and holiday sales were weaker than expected. No surprises here.

Byline: Lafferty (MF Merlin)