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Leading Economic Index Suggests US Economy May Be Growing

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Jul. 30 2015, Updated 2:58 a.m. ET

Conference Board Leading Economic Index

The Conference Board, an independent research association, publishes leading, coincident, and lagging indices for the US every month. These composite economic indices are published in an effort to signal peaks and troughs in the business cycle. Out of the three indices, the Conference Board LEI (Leading Economic Index) is the most important. It tends to indicate what may happen in the future.

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LEI above market expectations

According to the Conference Board’s June 18 report, the LEI recorded a steady 0.7% rise in May to 123.1. That’s above the market consensus of 0.4%. And this is the third straight month of increase since a decline was reported for February. Do note that this indicator is subject to revisions if any of its components get changed.

The LEI rose in May, as did nine of its ten components. Building permits and the interest rate spread—or the difference between the ten-year Treasury yield and the federal funds rate—were the biggest contributors to the increase. None of the components fell. Instead, average weekly manufacturing hours were flat compared to the previous month.

Investment impact

A steady-to-improved reading suggests that the US economy might be on its way up after a weak first quarter. Improving economic prospects for the US should lead to a stronger dollar.

Gold and the US dollar are usually inversely related. So, a strong set of leading indicators is negative for gold (GLD) and gold stocks including Iamgold (IAG), Barrick Gold (ABX), Royal Gold (RGLD), and Agnico Eagle Mines (AEM).

The VanEck Vectors Gold Miners ETF (GDX) invests in senior and intermediate gold producers. Combined, Goldcorp (GG), Barrick Gold, Newmont Mining (NEM), and Royal Gold form 17.1% of its holdings.

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