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Economy in Brief

U.S. Leading Economic Indicators Strengthen
by Tom Moeller  August 22, 2019

The Conference Board's Composite Index of Leading Economic Indicators increased 0.5% (1.6% y/y) during July following a 0.1% June decline, revised from -0.3%. It was the largest rise since September 2018. A 0.2% increase 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.

Performance amongst the components of the Leading Indicator index was mixed. Contributing positively to the index were the readings for building permits, initial unemployment insurance claims, stock prices, consumer expectations for business/ economic conditions and the leading credit index. Offsetting these increases were declines in the average workweek, the ISM new orders index, factory orders for nondefense capital goods excluding aircraft and the yield spread between 10-year Treasuries and Fed Funds. Factory orders for consumer goods & materials held steady.

Three-month growth in the leading index rebounded m/m to 1.4% (AR) but remained below the high of 9.1% in December 2017.

The Index of Coincident Economic Indicators increased 0.2% (1.8% y/y), the same as in June which was revised from 0.1%. The rise reflected increases in personal income less transfer payments, nonagricultural payroll employment and manufacturing & trade sales. Industrial production fell after an upward revision to June.

Three-month growth in the coincident index improved to 1.9% (AR), its strongest since February.

The Index of Lagging Economic Indicators increased 0.6% last month (3.5% y/y) after a 0.5% June rise, revised from 0.6%. The average duration of unemployment surged for a second month. Commercial & industrial loans outstanding, the services CPI, the ratio of consumer credit outstanding-to-personal income also contributed positively to the lagging index. Growth in unit labor costs contributed negatively to the index change. The average prime rate charged by banks held steady as did the business sector I/S ratio.

Three-month growth in the lagging index strengthened to 4.2%, its quickest since February.

The ratio of coincident-to-lagging economic indicators is sometimes considered a leading indicator of economic activity. It declined to nearly 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.

The minutes to the latest FOMC meeting are available here.

Business Cycle Indicators (%) July June May July Y/Y 2018 2017 2016
Leading 0.5 -0.1 -0.1 1.6 5.7 4.0 1.0
Coincident 0.2 0.2 0.1 1.8 2.2 2.0 1.1
Lagging 0.6 0.5 -0.1 3.5 2.4 2.5 3.0
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