The Organization for Economic Cooperation and Development (OECD) released its monthly report on composite leading indicators (CLIs) for February, 2010. The CLI came in at 103.57, continuing a streak of higher readings since the bottom of the CLI in early 2009. The OECD noted the strongest readings in the United States and Japan, with weakness in France and Italy.
The purpose of a leading indicator series, as the name suggests, is to give an early sign of a turn in the economic cycle. The OECD said that the CLI usually turns up six to nine months before the economy itself turns up. Although this doesn't always hold true, and a turn in the economic cycle can fall outside that range, the latest data implies that we are already in a fairly strong recovery.
Railing the Competition
The Association of American Railroads reported in its monthly Rail Time Indicators report that U.S. freight railroads originated 1.4 million carloads in March 2010. The weekly average of 289,000 in March 2010 was the highest level since November 2008, and the first year over year increase since July 2008.
The number of carloads originated is still far below levels reached in 2006, when more than 340,000 carloads were originated, but at least the trend is in the right direction.
Obviously, this is good news for the railroad companies, including Union Pacific Corp (NYSE:UNP), CSX Corp (NYSE:CSX) and Norfolk Southern (NYSE:NSC). All three of these stocks are inching closer to all time highs reached in the summer of 2008.
The American Staffing Association (ASA) reported that in March 2010, the ASA Staffing Index was 83, 15% higher than March 2009, and up 4% sequentially from February, 2010.
The ASA states that temporary employment is a leading indicator for non-farm payrolls by an average of three months during recession, and six months in times of normal economic growth. Once again, this index is far below levels reached in 2007, but the up trend is encouraging.
The Bottom Line
Commentary by managements on quarterly earnings conference calls has also been bullish on the economy. Patrick Pichette, the CFO of Google (Nasdaq:GOOG) said during the first quarter of 2010 conference call that the quarter was strong and that, "Large advertisers have come back in force versus last year, reflecting really an improved economy."
The doom and gloom crowd and the prediction of another downturn in economic activity get plenty of press, but economic statistics and anecdotal management commentary seem to contradict that prediction.