What are the Leading Economic Indicators?

Barry Ritholtz does a very good job of taking us through what is actually in the LEI, and he notes changes that might render it less accurate.

In terms of the recent numbers, which have been surprisingly upbeat, he notes that, "The 0.1% LEI reading was marginally positive primarily due to 3 factors: 1) increasing stock prices (.16); 2) Positive yield curve (.14); 3) An unfathomable 0.13% increase in building permits."

I don't place much stock in the stock market as a predictor, and the yield curve going positive is an artifact of the Fed dropping rates like a pole axed steer.

As to the increase in building permits, I gotta figure that there is just something wrong here.

In terms of the changes in the LEI, Ritholtz notes:

Recall that a few years ago, the LEI was reconfigured -- mostly to include more financial factors, and less real world economic data. Inthat way, its a bit more like government data. The reconfigurations seem to be avoid showing negatives.

And I am inclined to agree.

Here is a question though: what happens when the statistics can no longer be fudged?

Go read it.