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Economy in Brief

U.S. Leading Economic Indicators Rise Moderately; Coincident Indicators Growth Evaporates
by Tom Moeller  May 17, 2019

The Conference Board's Composite Index of Leading Economic Indicators increased 0.2% (2.7% y/y) during April following a 0.3% March gain, revised from 0.4%. The rise matched expectations in the Action Economics Forecast Survey. The series is comprised of 10 components which tend to precede changes in the overall economy.

The rise in the Leading Indicators was lead by higher stock prices and improved consumer expectations for business/economic conditions. Fewer initial claims for unemployment insurance, more orders for consumer goods & materials, an increased number of building permits and a steeper yield spread between 10-year Treasuries and Fed Funds also contributed positively to the index rise. A lower ISM new orders index and fewer nondefense capital goods orders contributed negatively. The length of the average workweek had no effect on the leading index change.

Three-month growth in the leading index improved to 2.5% (AR) from little change between December and February.

The Index of Coincident Economic Indicators edged 0.1% higher (1.8% y/y) for the second straight month. The change in personal income less transfer payments, nonagricultural payroll employment and manufacturing & trade sales contributed positively to the index change. Industrial production growth had a negative effect for the third month in the last four.

Three-month growth in the coincident index of 0.4% (AR) was below 3.1% late in 2018.

The Index of Lagging Economic Indicators edged 0.1% lower last month (+2.7% y/y) following firm gains during Q4'18 and Q1'19. The average duration of unemployment, fewer commercial & industrial loans outstanding and growth in unit labor costs contributed negatively to the index change. The ratio of consumer credit outstanding-to-personal income, six-month growth in the services CPI and the business inventory-to-sales ratio had positive effects on the index change. The average prime rate charged by banks was unchanged for the third straight month.

Three-month growth in the lagging index fell sharply to 1.5% (AR) from 5.4% at yearend.

The ratio of coincident-to-lagging economic indicators is sometimes considered a leading indicator of economic activity. It continued its long-lived sideways movement during April.

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 Disconnect between Inflation and Employment in the New Normal from Federal Reserve Governor Lael Brainard is available here.

Business Cycle Indicators (%) Apr Mar Feb Apr Y/Y 2018 2017 2016
Leading 0.2 0.3 0.2 2.7 5.7 4.0 1.0
Coincident 0.1 0.1 -0.1 1.8 2.2 2.0 1.1
Lagging -0.1 0.2 0.3 2.7 2.4 2.5 3.0
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