LEI, a predictor of the economy’s future performance, declined more than expected last month, says Conference Board.
NEW YORK (CNNMoney.com) — An indicator of the economy’s future performance dropped in October, reversing a September gain, according to The Conference Board.
The index of leading economic indicators, released by the business research group Thursday, decreased by 0.8% in October. This brings the index down to 99.6, from 100.4 in September.
“It’s down enough to warrant more than a flashing yellow signal,” said Ken Goldstein, an economist with the Conference Board. “This is close to a full red stop signal.”
Goldstein said this indicates that the U.S. economy is in a “contraction,” similar to the European Union and Japan.
This erases the gains from the prior month. The Conference Board initially reported that the index rose 0.3% in September, but that was revised downward to an increase of 0.1%.
The October figure was slightly worse than expected. According to a consensus compiled by Briefing.com, economists had expected the index to drop 0.6%.
The Conference Board blamed the decline on “negative contributions” from stock prices, building permits, consumer expectations and the index of supplier deliveries.
This was in spite of “positive contributions” from increases in the real money supply — as more money is pumped into the system, which can boost the economy — and growth in the interest rate spread between three-month and 10-year Treasuries — indicating investor confidence in the U.S.’s prospects for long-term growth, the Conference Board said.
Before September, the index of leading economic indicators had been on the decline. It fell by 0.9% in August and dropped 0.7% in July.
The index is designed to predict economic activity six to nine months in to the future. It incorporates a variety of economic data including jobless claims, manufacturers’ orders and personal income.
By Aaron Smith, CNNMoney.com staff writer
Last Updated: November 20, 2008: 10:56 AM ET
Source: CNN Money