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Economy in Brief

U.S. Leading Economic Indicators Surge
by Tom Moeller  February 22, 2018

The Conference Board's Composite Index of Leading Economic Indicators strengthened 1.0% during January. That raised the y/y change to 6.2%, its strongest since October 2014. The latest increase followed an unrevised 0.6% December gain. A 0.6% rise had been expected in the Action Economics Forecast Survey.

Most of the component series in the leading index rose. The ISM new orders index, building permits, stock prices and the leading credit index added equally to the overall increase, while the interest rate spread between 10-Year Treasuries & Fed funds, and consumer expectations for business/economic conditions added just slightly. Fewer initial unemployment insurance claims and more nondefense capital goods orders added minimally. The average workweek and orders for consumer goods held steady.

The Index of Coincident Economic Indicators inched 0.1% higher last month (2.2% y/y), following an unrevised 0.3% December rise. Personal income less transfer payments, business sales and payroll employment contributed positively to the index. Industrial production exhibited a minimal negative influence. Three-month growth in the index eased to 2.4% (AR), but still was improved versus 1.3% in 2015.

The Index of Lagging Economic Indicators gained 0.1% (2.5% y/y) last month after an unrevised 0.7% rise. The services CPI, the consumer credit/personal income ratio, and the prime rate charged by banks had positive effects on the index, while the average duration of unemployment and C&I loans outstanding contributed negatively. Three-month growth in the lagging index remained strong at 3.5%, up from 2.6% last year.

The ratio of coincident-to-lagging indicators is often considered to be a leading indicator of economic activity. As economic slack diminishes relative to current performance, the ratio will rise. It held steady last month near the 1975 low.

The Conference Board figures are available in Haver's BCI database; the components are available there, and most are also in USECON. The expectations are in the AS1REPNA database. Visit the Conference Board's site for coverage of leading indicator series from around the world.

The U.S. Economy after the Global Financial Crisis from Fed Vice Chairman Randal K. Quarles can be found here.

Business Cycle Indicators (%) Jan Dec Nov Jan Y/Y 2017 2016 2015
Leading 1.0 0.6 0.4 6.2 4.1 1.2 4.2
Coincident 0.1 0.3 0.2 2.2 1.7 1.3 2.2
Lagging 0.1 0.7 0.1 2.5 2.6 2.9 3.7
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