Recent increases in various economic indicators have led many commentators to suggest that perhaps the recovery is in sight. AIER’s primary leading indicators, however, do not yet signal a turnaround. 

The percentage of leaders expanding remains at 18, unchanged from last month. The cyclical score of the leaders increased somewhat, from 29 last month to 33 this month. A value below 50 for all of our measures indicates that contraction is more likely that a recovery.

Several mild increases did appear in the latest data for some of the primary leading indicators, such as new order for consumer goods, new housing permits, the ratio of manufacturing and trade sales to inventories, the index of common stock prices, the average workweek in manufacturing, and initial claims for state unemployment insurance (inverted). But these increases are small and do not change the overall picture. Our methodology leads us to be cautious. Every economic series exhibits random fluctuations from month to month. Meaningful conclusions cannot be drawn from them. We smooth out the fluctuations by averaging data for several months to isolate the cyclical trend. The recent increases in the data are so small that they are indistinguishable from the random fluctuations and do not warrant a change in appraisals.

None of the roughly coincident indicators is appraised as expanding, strongly confirming the view that the economy is in recession. The percentage of primary lagging indicators appraised as expanding fell from 20 last month to 17 (one out of six) this month. The primary lagging indicators show that the economy is working through some of the imbalances, which is necessary before recovery can begin.

Read a general description of our indicators and methods of analysis.

• Receive a detailed monthly analysis of business conditions, plus articles and books on a wide range of economic issues. Learn more about the benefits of Membership.

Bookmark this article: