Leading Indicators Show Improving U.S. Economy

Leading Economic IndicatorsJust one day after Janet Yellen reported moderate economic growth, a crucial indicator confirmed the Federal Reserve’s analysis.

On Friday, June 19th, the Conference Board released its widely-followed Leading Economic Index, a composite of indicators that hint at future growth. The index clocked in at 0.7% in May, exceeding expectations by 30 basis points. (Source: Conference Board Press Release, June 18, 2015.)

The board also released its coincident and lagging indices, which measure where the economy is and how much it grew recently. Those indices edged up 0.1% and 0.2% respectively, revealing that economic growth was relatively subdued for the first half of the year.

Improving Economic Outlook

The data on manufacturing orders and industrial production underwhelmed analysts, but residential construction and consumer expectations bolstered the upward swing. (Source: NASDAQ, June 18, 2015.) Stock prices ticked up, while the average duration of unemployment ticked down. (Source: Conference Board Technical Details PDF, June 18, 2015.)

By aggregating several indicators into one composite, the Conference Board provides a handy tool for investors. There are blind spots in every indicator; thus, pooling them increases the metric’s accuracy.

Planning for the Future

The data is surprisingly upbeat considering that U.S. gross domestic product (GDP) contracted 0.7% in the first quarter of 2015. Economists are now approximating second-quarter growth at an annualized 2.5%. (Source: Bloomberg, June 18, 2015.)

The news is likely to provide a tailwind for stock markets over the coming months. On the same day of the release, the NASDAQ Composite climbed to an all-time high, showing how optimistic investors are about the near future.