Things Appear to Be Looking Up in the US

Some economists say that palm reading was invented to make them look good!

So often it seems that forecasts made by economists and market commentators often fall wide of the mark. Often when these forecasts revolve around a particular issue or problem these then tend get fixed and of course then the forecast does not turn out correct!

Some forecasts however are worth watching. These are the ones made by the so-called ‘leading indicators’. These are certain economic statistics whose values reach peaks or troughs in advance of the actual economy achieving its peaks and troughs.

One of these indicators I find worth watching for its good track record is published by the New York-based Conference Board. They have put together a series of statistics into an index which is issued monthly. The series includes figures for factory hours worked, jobless claims, supplier delivery times, changes in share prices, numbers of building permits, orders for capital goods, the level of the money supply, the cost of money and levels of consumer expectations.

While any one factor may not give a reliable pointer to the future when they are taken together they give a fairly good indicator of what is happening in an economy. Their movements point to the direction and strength of change.

The Conference Board Index of US Leading Indicators has now improved fairly steadily for some months, leading to a 1.4% rise in March, the biggest since May 2009.

These indicators show the US economy is definitely improving. While there are still issues to be addressed we should take some comfort from this improvement as the strength of the US economy still has a significant bearing on global economic activity.

For investors this points to the need to maintain an exposure to global share markets to capture gains from this improvement. Portfolios should be reviewed to ensure the level of exposure and the performance of the holdings are where they should be.

This is one economic forecast we should have some confidence in!