Don't Fight the Fed. Yet, this may be one reason for the rate cut.
The leading index decreased 0.3 percent, the coincident index increased 0.1 percent, and the lagging index decreased 0.4 percent in March. Taken together, the three composite indexes and their components suggest slow growth until late in the second quarter of this year.
With this month’s decline, the leading index has dropped in five of the last six months, a continuation of its steady decline since January of last year. After reaching its most recent high in September 2000, the coincident index has been flat. Growth in the manufacturing sector will determine the strength in the coincident index in the coming months.
Despite the fall in the leading index and the flat coincident index, the ratio of coincident to lagging index is up again for the third straight month in March, indicating a potential for improved growth.
LEADING INDICATORS. Six of the ten indicators that make up the leading index decreased in March. The negative contributors to the leading index in March, from largest to smallest, were stock prices, vendor performance, average weekly initial claims for unemployment insurance, building permits, interest rate spread, and manufacturers’ new orders for consumer goods. The positive contributors to the index, from largest to smallest, were money supply, index of consumer expectations, and manufacturers’ new orders for nondefense capital goods and materials. Average weekly manufacturing hours held steady for the month of March.
The leading index now stands at 108.5 (1996=100). Based on revised data, this index decreased 0.2 percent in February and increased 0.5 percent in January. During the six-month span through March, the leading index decreased 1.2 percent with three of the ten components advancing (diffusion index, six-month span equals 30 percent).
(The put/call ratio is going to be under .50) |
