Leading Indicators Might Not Lead to Economic Expansion

The Conference Board Leading Economic Index for the United States increased a modest 0.4 percent in May, following an even more modest no change in April, and a 1.4 percent rise in March. In other words, the economy is shrugging its shoulders and saying that can't be bothered to grow too much in the near future.

June 18, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user The Pug Father

The Conference Board Leading Economic Index for the United States increased a modest 0.4 percent in May, following an even more modest no change in April, and a 1.4 percent rise in March. In other words, the economy is shrugging its shoulders and saying that can’t be bothered to grow too much in the near future.

“The index points to continued, though slower, U.S. growth for the rest of this year,” Bart van Ark, chief economist of the Conference Board, noted in a statement on Thursday. “Public debt and deficits weigh heavily on growth prospects on both sides of the Atlantic. We project a serious slowdown in European growth in 2011, which could further weaken the U.S. outlook.”

The LEI for the United States has been rising since April 2009, though its growth rate has slowed in early 2010. Current economic conditions, as measured by the Conference Board Coincident Economic Index, have been improving steadily since November 2009 because of gains in payroll employment and industrial production.

Hard Time for Mortgage Miscreants?

More mortgage fraud prosecutions are in the works, according to the U.S. Department of Justice. Speaking at a press conference in Washington, DC, on Thursday, Attorney General Eric Holder described the department’s efforts to toss mortgage fraudsters in the jug, or at least make them pay–an effort called Operation Stolen Dreams.

“This operation began on March 1, and to date [has] involved 1,215 criminal defendants nationwide, defendants who were allegedly responsible for more than $2.3 billion in losses,” Holder said. “In addition, the operation [has] involved 191 civil enforcement actions through which more than $147 million has been ordered recovered, with still millions more pending court approval.”

He promised more to come. “This takedown is just the latest effort in our ongoing fight,” the AG asserted. “The Department of Justice has requested $178 million in our FY2011 budget to fight mortgage fraud, an increase of over $18.4 million. The FBI has over 3,000 pending mortgage fraud cases, almost double the figure from FY08, and those numbers will continue to grow.”

Prices Refuse to Rise

The small uptick in weekly first-time unemployment filings announced on Thursday got some attention, but less noticed was the U.S. Labor Department’s report that–excluding food and energy prices–consumer prices rose a slender 0.1 percent in May. Compared to a year ago, again excluding food and energy, prices have risen only 0.9 percent, the smallest increase since 1966.

Wholesale product prices, as reflected by the producer price index, fell 0.3 percent in May from April, though wholesale prices were still 5.3 percent higher than in May 2009. Does it mean deflation is on the way? Does anyone alive now even know what deflation feels like?

Based on the experience of the Great Depression, economists posit that deflation would be very bad indeed, as consumers and businesses delay purchases, waiting for better prices. Something like in the housing market, except in every market.

Wall Street was mostly down on Thursday, vexed by an uptick in unemployment and other momentary ill-tidings, but still ended the day in positive territory. The Dow Jones Industrial Average gained 24.71 points, or 0.24 percent, while the S&P 500 and the Nasdaq advanced 0.13 percent and 0.05 percent, respectively.