terça-feira, maio 31, 2005
Pois, pois, pois
I think I have figured out why economists downplay the significance of the Leading economic indicators (LEI) index. It is to preserve their jobs. After all, if the LEI index does a better job of forecasting the behavior of the economy than do economic forecasters, why do we need economic forecasters?
Although a contraction in the LEI index may not always signal an NBER-designated recession, it does signal weaker growth in the Coincident Economic Indicators index.
By the way, the highest correlation, 0.77, between the growth in the Coincident index and the Leading index occurs when the Leading index is advanced by 7 months.
A correlation coefficient of 0.77 is not perfect. Perfect would be 1.00. But folks, a correlation of 0.77 is fantastic for government work and its darned good for private sector work, too.
[The Conference Board announced on May 26th that the LEI fell 0.2% in April after having dropped a downwardly-revised 0.6% in March. On a year-over-year basis, the April LEI index is down 1.2% -- the largest year-over-year percent decline since the 2.0% drop in April 2001]
Paul Kasriel (edited)
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Although a contraction in the LEI index may not always signal an NBER-designated recession, it does signal weaker growth in the Coincident Economic Indicators index.
By the way, the highest correlation, 0.77, between the growth in the Coincident index and the Leading index occurs when the Leading index is advanced by 7 months.
A correlation coefficient of 0.77 is not perfect. Perfect would be 1.00. But folks, a correlation of 0.77 is fantastic for government work and its darned good for private sector work, too.
[The Conference Board announced on May 26th that the LEI fell 0.2% in April after having dropped a downwardly-revised 0.6% in March. On a year-over-year basis, the April LEI index is down 1.2% -- the largest year-over-year percent decline since the 2.0% drop in April 2001]
Paul Kasriel (edited)
