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Economy in Brief

U.S. Leading Economic Indicators Show Surprising Improvement
by Tom Moeller  February 20, 2020

The Conference Board's Composite Index of Leading Economic Indicators strengthened 0.8% during January following an unrevised 0.3% December decline. It was the largest increase since October 2017. The latest reading compared to a 0.4% rise expected in the Action Economics Forecast Survey. The series is comprised of 10 components which tend to precede changes in the overall economy.

Last month's strength was paced by large increases in the weekly initial claims for unemployment insurance and the building permits components. The factory orders for nondefense capital goods, stock prices, the yield spread between 10-year Treasuries & Fed Funds, consumer expectations for business/economic conditions, consumer goods orders and the leading credit index also contributed positively to the index. The length of the average workweek had a neutral effect and the ISM new orders index contributed negatively to the index change.

Three-month growth in the leading index improved to 2.5% (AR) following three straight negative readings. The y/y change of 0.9% compared to a 6.5% high in September 2018.

The Index of Coincident Economic Indicators rose 0.1% during January after holding steady in December, revised from 0.1%. The y/y change of 1.1% was the weakest since September 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 index.

Three-month growth in the coincident index of 1.9% (AR) remained down from 2.3% in August.

The Index of Lagging Economic Indicators held steady during January after an unrevised 0.1% dip in December. Contributing negatively to the index change were the average duration of unemployment and the change in factory sector unit labor costs. Contributing positively were the changes in C&I loans outstanding and in the services CPI, the business inventory-to-sales ratio, the ratio of consumer credit outstanding to personal income and C&I loans outstanding. The prime rate charged by banks and the business I/S ratio had neutral effects.

Three-month growth in the lagging index fell to 0.7% from 4.2% six months earlier.

The ratio of coincident-to-lagging economic indicators is considered another leading indicator of economic activity. It increased to a four-month high.

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 (%) Jan Dec Nov Jan Y/Y 2019 2018 2017
Leading 0.8 -0.3 0.1 0.9 1.5 5.7 3.9
Coincident 0.1 0.0 0.4 1.1 1.8 2.5 2.2
Lagging 0.0 -0.1 0.3 1.7 2.8 2.5 2.4
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