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Nov Leading Economic Index (LEI) Posted Gain

The leading economic index (LEI) posted a 0.6% November gain after a modest upward revision that largely tracked estimates, leaving a seven-month stretch of out-sized increases. We saw prior gains of 0.8% (was 0.7%) in October, 0.7% in September, 1.6% in August, 2.0% in July, 3.1% in June and 3.0% in May. We saw declines of -6.4% in April and -7.4% in March that marked the largest drops on record. The previous record decline was a -3.4% drop in October of 2008. The out-sized May-November LEI rebound after the March-April plunge isn’t telling us much, beyond simply documenting the historically huge magnitude of the rebound.

* Leading indicators rose 0.6% in November, after a 0.8% (was 0.7%) October gain.

* Seven of the ten LEI components contributed positively, led by a 0.20 boost from initial claims.

* Three components contributed negatively, led by a -0.09 subtraction from consumer expectations.

* The six-month annualized LEI slipped to 19.5% from 25.1% (was 24.7%) in October.

* The y/y LEI rose to -2.2% from -2.7% (was -2.9%) in October.

Seven of the 10 components made positive contributions, led by claims (0.20%), new orders (0.19%), building permits (0.17%), and stock prices (0.15%). Declines were registered in consumer expectations (-0.09%), the workweek (-0.07%), and nondefense capital goods orders (-0.02%).

The LEI now sits at 109.1, which is well below the recent-peak of 112.0 in January that matched the 112.0 all-time high back in July of 2019, leaving a seven-month plateau in advance of the global pandemic. The 97.0 trough in April marked the weakest reading since September of 2014.

We expect Q4 growth of 6.5% for industrial production and 6.0% for GDP, following respective Q3 growth of 42.5% and an estimated 33.3% (was 33.1%). This followed respective record contraction rates of -42.6% and -31.4% in Q2, and -6.8% and -5.0% in Q1.

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