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Economy in Brief

U.S. Leading Economic Indicators Index Eases
by Tom Moeller  January 23, 2020

The Conference Board's Composite Index of Leading Economic Indicators declined 0.3% during December following a 0.1% November uptick, revised from no change. It was the fourth decline in five months. During all of 2019, the leading index rose 1.5% after a 5.7% increase during 2018. From December-to-December the index ticked up 0.1%. The latest reading compared to a 0.2% decline expected in the Action Economics Forecast Survey. The series is comprised of 10 components which tend to precede changes in the overall economy.

Contributing negatively to the index change were weekly initial claims for unemployment insurance, building permits and the ISM new orders index. Contributing positively were stock prices, factory orders for consumer goods, the yield spread between 10-year Treasuries & Fed Funds, consumer expectations for business/economic conditions and the leading credit index. Exhibiting a neutral effect on the change in the leading index were the average workweek and new orders for nondefense capital goods excluding aircraft.

Three-month growth in the leading index of -1.4% (AR) was negative for the third straight month and below the high of +9.1% in December 2017. The y/y change eased slightly to 0.1% compared to a 6.5% high in September 2018.

The Index of Coincident Economic Indicators rose 0.1% during December after increasing 0.3% in November, revised from 0.4%. During all of last year, the index rose a lessened 1.7% from 2018. The December-to December increase slowed to 1.2%, the weakest 12-month increase since October 2016. Three of the component series contributed positively to last month's rise including payroll employment, personal income less transfer payments and manufacturing & trade sales. Industrial production contributed negatively to the change in the coincident indicator index.

Three-month growth in the coincident index held steady m/m at 1.1% (AR) but was down from 2.3% in August.

The Index of Lagging Economic Indicators eased 0.1% during December after a 0.4% November gain, revised from 0.5%. Contributing negatively to the index change were the average duration of unemployment, the change in factory sector unit labor costs, the change in C&I loans outstanding and the change in the services CPI. The business inventory to sales ratio and the ratio of consumer credit outstanding to personal income contributed positively. The prime rate charged by banks held steady.

Three-month growth in the lagging index eased slightly to 1.9%, but remained up from -0.4% in October. Twelve-month growth declined to 2.3%, down from 3.5% in July.

The ratio of coincident-to-lagging economic indicators is sometimes considered a leading indicator of economic activity. It increased modestly in December.

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 (%) Dec Nov Oct Dec Y/Y 2019 2018 2017
Leading -0.3 0.1 -0.2 0.1 1.5 5.7 3.9
Coincident 0.1 0.3 -0.1 1.2 1.7 2.5 2.2
Lagging -0.1 0.4 0.2 2.3 2.8 2.5 2.4
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