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Economy in Brief

U.S. Leading Economic Indicators Increase
by Tom Moeller  December 20, 2018

The Conference Board's Composite Index of Leading Economic Indicators improved 0.2% (5.2% y/y) during November following a 0.3% October decline, revised from +0.1%. No change in the index level had been expected in the Action Economics Forecast Survey. The series is comprised of 10 components which tend to precede changes in the overall economy.

Movement amongst the components of the index remained mixed last month. Positive influences on the index were a greater number of building permits, a higher ISM new orders index, improved consumer expectations for business/economic conditions, a steeper interest rate spread between 10-Year Treasuries & Fed funds, more nondefense capital goods orders as well as more consumer goods & material orders. Negative influences on the index was provided by lower stock prices, a decline in average weekly hours-worked and higher initial unemployment insurance claims.

Three-month growth in the leading index declined to 2.2% (AR), the weakest growth in two years.

The Index of Coincident Economic Indicators increased 0.2% (2.1% y/y) in November following a 0.1% uptick during October, revised from 0.2%. Each of the index components contributed positively including changes in personal income less transfer payments, industrial production, nonagricultural payroll employment and manufacturing & trade sales.

Three-month growth in the coincident index eased to 1.9% (AR). That was below the 3.6% peak as of December 2017 and below the 3.1% growth rate in August.

The Index of Lagging Economic Indicators increased 0.4% last month (2.8% y/y) following a 0.5% October rise, revised from 0.4%. The change in commercial & industrial loans outstanding, the average duration of unemployment, the six-month change in unit labor costs and the consumer installment credit/personal income ratio contributed positively to the index change. Six-month growth in the services CPI contributed negatively. The average prime rate and the ratio of business inventories-to-sales had no effect on the index change.

The three-month growth in the lagging index strengthened 2.7%, the quickest growth since June and up from no change as of August.

The ratio of coincident-to-lagging indicators is often considered to be another leading indicator of economic activity. As economic slack diminishes relative to current performance, the ratio will rise. It eased to 99.0 last month, the lowest level since June.

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.

Business Cycle Indicators (%) Nov Oct Sep Nov Y/Y 2017 2016 2015
Leading 0.2 -0.3 0.6 5.2 4.1 1.2 4.2
Coincident 0.2 0.1 0.2 2.1 1.8 1.3 2.2
Lagging 0.4 0.5 -0.2 2.8 2.6 2.9 3.7
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