Skip to main content

The Globe and Mail

U.S. Leading Economic Indicators provides latest disappointment

closed shop sign

PinkBadger

U.S. Leading Economic Indicators were reported well below expectations Thursday at -0.3 per cent. Importantly, the most forward-looking component of the index, New Orders, was primarily responsible for the negative surprise.

Leading Indicators was only the latest in a regrettably long series of data points indicating a global economic slowdown. Canadian resource stocks, sensitive to changes in global manufacturing activity, have suffered disproportionately as a result. The S&P/TSX Diversified Mining Index and S&P/TSX Energy Index have fallen 20 per cent and 6.8 per cent year to date respectively.

ISM New Orders was the primary negative influence on Leading Economic Indicators for June. A key component of the index, New Orders has historically predicted changes in manufacturing activity, and thus economic growth, for future quarters.

Story continues below advertisement

Consumer sentiment formed the next largest detractor from the index. A weaker than expected survey result for Consumer Expectations and Economic Conditions reduced LEI by -0.13 for the month, indicating the effects of slow employment growth.

Canadian investors can take some solace in the fact that LEI is a volatile data series with an inconsistent history in predicting the course of the S&P/TSX Composite index. (See chart). While often indicating the future direction of U.S. economic data, the LEI has also provided false signals, and made abrupt month over month shifts from positive to negative.

Report an error Licensing Options
About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.