Leading Index climbs higher

The Conference Board's Leading Economic Index jumped a strong 1.4% in March, which comes on top of healthy upward revisions to fairly lackluster increases in January and February.

“The U.S. LEI has risen steadily for a year, and its six-month growth rate has remained fairly stable in recent months – led by improvements in financial and labor market indicators.

"Payroll employment made its first substantial contribution to the coincident economic index, suggesting a recovery that is beginning to gain traction, according to Conference Board economist Ataman Ozyildirim.

Ken Goldstein, economist at The Conference Board, added, “The indicators point to a slow recovery that should continue over the next few months. The leading, coincident and lagging series are rising. Strength of demand remains the big question going forward. Improvement in employment and income will be the key factors in whether consumers push the recovery on a stronger path.”

Agreed, in my view. Without gains in employment, income growth will be anemic. And anemic income growth will require consumers to dig into savings (or look to credit) in order to fuel sales among the nation's retailers.

There may be some pent-up demand that could be unleashed, but uncertainty abounds. Without rising employment, growth will likely be modest at best.

What's moving

Manufacturing is experiencing a V-shaped recovery, while housing has stabilized and is starting to perk up due to the expected expiration of the tax credits. And business and consumer spending has improved modestly.

Based on what the Leading Index is telling us, we appear set to see further gains in economic activity and a broadening of the recovery.