Wells Fargo: The Economy’s Engine Is Sputtering a Bit

Weakness in the US leading economic indicator…would have been weaker if Fed rates were excluded:

The LEI is probably a little weaker than the headline number suggests. The wider interest rate spread boosted the index by 0.3 percent in July and has made a slightly larger contribution to the index for six consecutive months. With the federal funds rate essentially at zero, the value of this component of the LEI is seriously in question. Without this component, the LEI would have fallen in three of the past four months and would have shown much less strength earlier this year. Conditions may already be taking care of themselves. The past month saw a dramatic flattening of the yield curve, with the yield on the 10-year Treasury falling to below 2.60 percent. When combined with the recent spike in jobless claims and the slide in share prices, we should see a drop in the LEI for August.

Read the full report by Wells Fargo