Leading Economic Indicators Signal Stong Near Term Growth

The index of leading economic indicators continues to signal very strong near-term rates of growth, at 0.6 percent in November following revised growth rates of 0.6 percent and 0.8 percent in the prior two months.

Once again the yield spread is the biggest positive for the index reflecting the Fed's near zero rate policy. Manufacturing orders, based on the ISM, are another strong plus in today's report as is the stock market. Credit indications are also solid.

On the negative side is November's sharp decline in building permits (posted Tuesday in the housing starts report) as well as initial unemployment claims which peaked back over 300,000 briefly late in the month. Initial claims, however, have since moved back below 300,000 as evidence in this morning's report.

This report is very healthy and fits in with arguments from the Fed's hawks who are warning that the economy is up and going and interest rates should be moving higher.

Recent History Of This Indicator:
The Conference Board's index of leading indicators rose a very strong 0.9 percent in October pointing to near term acceleration in economic growth. The largest positive was once again in interest rates which reflect the Fed's near zero rate policy. Low unemployment claims were a strong contributor as were housing permits. The stock market was the only negative in the report but here strength may rebound given gains so far in November. The leading index is running on the warm side but does underscore some of the economy's key pluses going into year-end and the New Year.