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Economy in Brief

U.S. Leading Economic Indicators Decline
by Tom Moeller  July 18, 2019

The Conference Board's Composite Index of Leading Economic Indicators fell 0.3% (+1.6% y/y) during June following unrevised stability in May. It was the first decline in six months. A 0.1% uptick 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.

The decline in the Leading Indicators reflected lower readings for several component series. The readings for initial unemployment insurance claims, the ISM new orders index, building permits, the yield spread between 10-year Treasuries and Fed Funds fell. Offsetting these declines was improvement in the average workweek, consumer goods orders, new orders for nondefense capital goods, stock prices and consumer expectations for business & economic conditions.

Three-month growth in the leading index declined to -0.7% (AR), down from the high of 9.1% in December 2017.

The Index of Coincident Economic Indicators inched 0.1% higher (1.6% y/y) during June after a 0.2% increase. The rise reflected gains in personal income less transfer payments, nonagricultural payroll employment and manufacturing & trade sales. Industrial production fell.

Three-month growth in the coincident index improved to 1.1% (AR), but remained below 3.1% in December of last year.

The Index of Lagging Economic Indicators strengthened 0.6% last month (2.6% y/y) after edging 0.2% lower in May. The average duration of unemployment surged as well as commercial & industrial loans outstanding. The ratio of consumer credit outstanding-to-personal income also contributed positively to the lagging index. Growth in unit labor costs and the gain in the services CPI contributed negatively to the index change and the average prime rate charged by banks held steady for the fifth straight month.

Three-month growth in the lagging index rose slightly to 1.5% (AR), but remained below 5.4% at yearend 2018.

The ratio of coincident-to-lagging economic indicators is sometimes considered a leading indicator of economic activity. It declined to the lowest level since early 1975.

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.

Why Is Inflation Low Globally? from the Federal Reserve Bank of San Francisco is available here.

Business Cycle Indicators (%) Jun May Apr June Y/Y 2018 2017 2016
Leading -0.3 0.0 0.1 1.6 5.7 4.0 1.0
Coincident 0.1 0.2 0.0 1.6 2.2 2.0 1.1
Lagging 0.6 -0.2 0.0 2.6 2.4 2.5 3.0
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