Weather and War Push LEI Down in February

The Conference Board said Thursday that its index of leading economic indicators fell 0.4% in February, the largest decline in five months as war fears and bad weather eroded U.S. economic growth.

"Nervousness over oil prices, war and the potential of a terror attack, plus bad weather, have helped produce a decline after a four-month positive trend in the leading indicators," said Conference Board Economist Ken Goldstein.

LEI, which projects the performance of the economy over the next three to six months, is made up of 10 components that Conference Board looks at and combines to produce a snapshot of the economy.

Of those 10 components, only three showed increases: real money supply, vendor performance and building permits; average weekly manufacturing hours held steady during February and six components declined for purposes of the LEI. The declining components were: stock prices, average weekly initial claims for unemployment insurance, index of consumer expectations, interest rate spread, manufacturers' new orders for consumer goods and materials and manufacturers' new orders for nondefense capital goods.

The consumer spending figures were especially troubling to the Conference Board.

“There are also signs that consumer spending could be slowing,” Goldstein said. “This is significant because, without more investment or export growth, consumption has been largely fueling the economy since the end of the recession.”

The LEI now stands at 111.1 after its first decline since September 2002. The index uses 1996 as a base, when it was 100.

Based in New York, the Conference Board was founded in 1916, but has been computing composite economic indexes for the Commerce Department since 1995.

(Click here for the full press release.)

By Sean McNally

I>Staff Reporter