Economic Indicators

Weekly Leading
Both sets of weeklies resumed advancing in Nov. following brief
respites. They remain strong, continue to signal a "V" recovery
and point to growth out through Q1 2010.

Monthly Leading
the momentum of the breadth of new orders for businesses has
leveled off. The indicator did make a slight cyclical high for Nov.
It is solidly positive but is well below boom levels. "V" pattern
is still indicated.

Business Strength Index
This indicator is well off its lows. Now in the 123 - 125 area, it is
still below the 130 - 140 threshold that normally marks a turn
toward tightening by the Fed. The weakness here is in capacity
utilization %.

Economic Power Index
This index declined sharply in Nov. as the yr / yr rate of inflation
cut into a declining rate of salary growth. Real wage growth could
flatten or turn slightly negative through early 2010. The
employment momentum part of the index improved markedly
last month as there was a mild gain in total civilian employment
after months of deep decline. The bottom line here is that basic
consumer purchasing power remains increasingly dependent on
automatic fiscal stabilizers and fiscal policy initiatives. The
favorable change in employment momentum is a good sign that
needs to carry through further in the months ahead. The rise in
oil and petrol prices through 2009 has undercut the recovery.

Economic Slack / Pent-up Demand both remain sizable
and form the base for a lengthy period of recovery.

Other Current
The depth and persistence of inventory liquidation did catch me by
surprise. A normal cyclical swing off current levels could alone add
1.5% to GDP over the next year.

The home purchase tax credit is helping to clear excess inventory
in the housing market. Mortgage purchase applications dropped
recently, so the inventory clearing process could slow in early 2010.

Long lead Indicator --US
This composite hit historically high levels in late 2008. It remains
strongly positive, although there has been some slippage in the
wage vs. inflation component recently.

Global
The global indicators are consistent with modest economic
expansion. The readings are far above the low levels seen back in
the depths of the recession, but are not especially strong. The flow
of new orders in foreign economies has lagged the US and I
would rate it as a little disappointing to date.

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For a look at a real-time measure of economic activity by the
Phila. Fed, (ADS / BCI) go here. Open the PDFs. The index
does not include the positive employment data for early Dec.
We need to see a reading above 1.0 soon here to confirm that
a decent recovery is underway.