Leading Indicator Surveys Flashing Red

Two leading indicator surveys suggest that the rebound in the US economy may be stalling (perhaps explaining the significant decline in the equity markets over the last few days). The ECRI Weekly Leading Index declined by 2% for the week ending May 7th, the lowest weekly decline since October 17, 2008. While this index has periodically declined from week to week over the past year, the 2% drop is significantly greater than any posting since the market bottomed last March (see 1st chart below).

In a similar vein, the Conference Board’s Monthly Leading Index survey experienced its first decline in April, falling a modest .1% (see second chart). While relatively small, the decline represents the first negative data point since March 2009 when the index fell .2%, only to be followed by a sharp rebound in April. Given that the market bottomed on March 9, 2009, most people view this survey as a remarkably prescient reading on were the market and economy are heading. While leading indicator surveys provide little insight into valuations and underlying fundamentals for individual companies, the fact that both surveys are flashing negative warning signs ought not to be dismissed by investors.