Wednesday, April 16, 2008

Why Inflation Can Lead or Lag Economic Cycles

If Temps (see the below) are a leading indicator that business is picking up its pace, what would be the equivalent leading indicator for government agencies? This question is born out of those who work and contract to the government. How do they best look at indicators that business is about to pick up? I know of some who literally read every line of each FY's budget to see what has changed and focus business development on areas that have picked up.

Would it be voter complaints? Just watching for pork barrel spending via bills?

Sent to you by ckstevenson via Google Reader:

via The Big Picture by ritholtz on 4/16/08
... Beyond the usual inflation denialists, however, this morning I want to discuss why inflation isn't properly described as a lagging indicator, and shouldn't be dismissed as just so much history. Those who do so do at the risk of their own financial peril.


For example, Unemployment tends to tick up for months after a recovery has began. Hence, it is said to lag the cycle. Temp help, on the other hand, leads the cycle, but is not one of the 10 Conference Board LEIs (but average manufacturing-worker workweek is). The Stock market tends to lead the cycle turns, falling before a recession starts, and rising before the recovery is apparent (there are many exceptions to this). Thats why its part of the LEIs.


Barry Ritholtz said...

Rather than reproducing an entire post, its preferable to merely "take" 2 or 3 paragraphs,

You can always point back to the original post for the balance

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