-- New York, NY, February 20, 2015 – Profit Confidential (www.ProfitConfidential.com), an e-letter published by Lombardi Publishing Corporation, a 29-year-old consumer publisher that has served over one million customers in 141 countries, is commenting on how three major economic indicators suggest the U.S. economy is getting weaker rather than stronger.
“With the S&P 500 and Dow Jones Industrial Average trading at record highs, most people believe economic momentum is on their side and the markets will remain bullish for the unforeseeable future,” says economist and lead contributor Michael Lombardi. “But the fact is that there are a number of major indicators that suggest the U.S. economy is actually getting weaker, not stronger.”
The Conference Board Leading Economic Index, designed to predict the future health of the U.S. economy, climbed in January by just 0.2%, the smallest amount in five months, indicating that U.S. economic momentum is slowing down. This comes on the heels of the December increase, which was revised lower to a 0.4% rise from the initially reported 0.5% increase. (Source: “Global Business Cycle Indicators,” The Conference Board web site, February 19, 2015; www.conference-board.org/data/bcicountry.cfm?cid=1.)
Lombardi explains that challenges with the U.S. housing market, which includes sales of existing homes and residential construction, coupled with weak capital spending, are putting additional pressure and pose a significant risk to the U.S. economy.
Pending home sales figures—homes that have been purchased under contract, but where the sale hasn’t gone through yet—have declined about five percent over the past six months. Most recently, pending home sales fell 3.7% in December from November, the largest one-month decline in a year. Economists had predicted December home sales would rise around 0.5%. (Source: “Pending Home Sales Stall in December,” National Association of Realtors web site, January 29, 2015; http://www.realtor.org/news-releases/2015/01/pending-home-sales-stall-in-december.)
On top of that, companies are not investing in their own businesses, says Lombardi. In December, new orders for capital goods by durable goods manufacturers (excluding defense) amounted to $73.64 billion. That represents a 45% decline from the $136 billion these companies spent in July of 2014, according to Lombardi. “Lack of capital spending is negative for job creation and shows how pessimistic corporate America really is,” Lombardi points out. (Source: “Value of Manufacturers' New Orders for Capital Goods: Nondefense Capital Goods Industries,” Federal Reserve Bank of St. Louis web site, February 3, 2015; http://research.stlouisfed.org/fred2/series/ANDENO.)
“The U.S. economy is getting weaker, not stronger. The stock market isn’t painting the real picture of what is going on in the economy and with American businesses,” Lombardi concludes. “Artificially low interest rates have pushed more and more investors into stocks as other investment vehicles are paying less. And with 75% of the S&P 500 companies propping up their per-share earnings with stock buyback programs, investors feel comfortable again about stocks; they shouldn’t.”
For more information on Profit Confidential, visit www.ProfitConfidential.com.
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.lombardipublishing.com.
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