Fundamentals improve but markets deteriorate

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The Conference Board reported that its Leading Economic Indicators index rose 0.3% during August following July's revised 0.6% increase, initially set at 0.5%. The gain beat the Consensus forecast for a 0.1% rise. Despite the increase, however, the latest six-month growth rate as calculated by the Conference Board fell to 4.8%, the slowest since last August.
In conjunction with slower growth, the breadth of increase amongst the component series fell. The 1-month diffusion index dropped to 40%, its least since during the recession, and the 6-month diffusion index also eased to a low 55%. Money supply growth together with a steeper yield curve added 0.9 percentage points to the leader's August gain. Lower stock prices & consumer expectations as well as a shorter workweek offset the bulk of these positive influences.
The index of coincident indicators ticked up just 0.1%, the same as during July which was revised down from 0.3%. The 1-month diffusion index held up at 88% as did the 6-month index at 100%, but the six-month growth rate fell to 1.6%, its least since Q3 last year. Three of the component series rose last month but employment was unchanged.
In a sign that economic excesses built up, the August lagging indicator index rose 0.3% for the third straight month. Growth in bank lending to commercial and industrial customers accounted again for most of the increase. The ratio of coincident-to-lagging indicators, which tends to "lead" the "leaders," fell for the sixth month in the last seven.
Fragmentary items available thus far in September paint a picture that is not promising for another advance in the leading index. As seen yesterday, unemployment insurance claims moved up to 444,000, stock prices fell sharply, the yield curve flattened and the Univ. of Michigan Index of Consumer Expectations slipped. Offsetting these declines was the money supply which continues higher
The Conference Board figures are available in Haver's BCI database; the components are available there, and most are also in USECON. The forecast figure is the Consensus in the AS1REPNA database. Visit the Conference Board's site for coverage of leading indicator series from around the world."

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