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Economy in Brief

U.S. Leading Economic Indicators Index Continues to Slip
by Tom Moeller  November 21, 2019

The Conference Board's Composite Index of Leading Economic Indicators eased 0.1% (+0.3% y/y) during October. That came after September's 0.2% drop, revised from -0.1%, and a 0.2% August shortfall. The latest decline matched expectations 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 remained mixed last month. Contributing negatively to the index change were the average workweek, initial unemployment insurance claims, ISM new orders, stock prices and the yield spread between 10-year Treasuries & Fed Funds. Offsetting these declines were more building permits, consumer expectations for business/ economic conditions, new consumer goods orders, new orders for nondefense capital goods and the leading credit index.

Three-month growth in the leading index of -1.8% (AR) remained below the high of +9.1% in December 2017. The y/y change held steady at 0.3% compared to a 6.6% high in September of last year.

The Index of Coincident Economic Indicators held steady (1.4% y/y) during October following a 0.1% September gain, revised from no change. Stability in the index reflected counterbalancing influences: increases in payroll employment, personal income less transfer payments and manufacturing & trade sales offset by a decline in industrial production.

Three-month growth in the coincident index held steady m/m at 1.5% (AR) but was down from 2.3% in August.

The Index of Lagging Economic Indicators improved 0.1% (2.5% y/y) for the second straight month. Increases in the series pertaining to the average duration of unemployment, the ratio of consumer credit outstanding to personal income and the six-month change in the services CPI contributed positively to the index change. These gains were offset by declines in the series covering the business inventory-to-sales ratio, the change in unit labor costs, the prime rate charged by banks and commercial & industrial loans outstanding.

Three-month growth in the lagging index declined to -1.5%, down from +4.2% growth as of July. Twelve-month growth has been fairly steady at 2.5%.

The ratio of coincident-to-lagging economic indicators is sometimes considered a leading indicator of economic activity. It was little changed from September but up from the July 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.

Business Cycle Indicators (%) Oct Sep Aug Oct Y/Y 2018 2017 2016
Leading -0.1 -0.2 -0.2 0.3 5.7 4.0 1.0
Coincident 0.0 0.1 0.3 1.4 2.2 2.0 1.1
Lagging 0.1 0.1 -0.6 2.5 2.4 2.5 3.0
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