Jon
Preferred Member
Cash: $ 50.02
Posts: 193
Joined: 13 Apr 2005
|
| Leadg eco indicatr show some erosion after a solid trend hi |
 |
|
February indicators fell 0.2%, a bit better than the -0.3% expected. That marked the first decline in five months. Not a major issue; you never want to draw too much upon one data point, particularly one that disagrees with the prevailing trend. January’s gains, however, were sliced in half (+0.5% versus 1.1% previously reported), adding a bit more weight to the notion that there is some slowing down the road. Indeed, this slowing indication is more in line with ECRI, a leading indicators index that is historically more accurate.
Both show continued growth but ECRI has suggested for a couple of months that the growth is peaking. That does not mean a sharp slide lower; any expansion will suffer a downturn or two or more as it cycles higher. As an expansion grows older, however, its ability to rebound decreases. If you put too much pressure on it, an older expansion will give up the ghost as its tank runs lower. That is the danger of the Fed; it tends to increase its pressure at the wrong time because it doesn’t feel its prior hikes have been effective enough. It is strange how a body designed supposedly of those making economics their life study consistently overestimates the economy’s strength after a couple of years of saddling it with rate hikes.
That is what makes the coming FOMC meetings so important. The market is expecting the Fed to lighten up after one, maybe two more rate hikes. It spent last week building that in. If the Fed once again miscalculates the impact of its actions on rates, it will go down that same old road it so often travels, and of course, the market will suffer for it. Thus the LEI is just another indication that the Fed should slow down and take heed of what are some modestly weaker economic reports that suggest after 3 years the economy should not be dumped on indefinitely.
We offer a FREE two week trial stock tradingnews letter . stock trading. Check out our online stock seminars. Financial Seminars.
|
