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Economy in Brief

U.S. Leading Indicators Increase in May
by Tom Moeller  June 18, 2020

• Broad-based component gains lift the leading index.

• Coincident indicators rebound moderately.

• Lagging indicators indicate less economic stress.

The Conference Board reported that its Composite Index of Leading Economic Indicators improved 2.8% during May (-10.6% y/y) following a 6.1% fall in April, revised from -4.4%. A 2.4% rise 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.

Last month's gain in the leading index reflected widespread improvement amongst the component series. The largest positive contributions came from fewer initial unemployment insurance claims which accounted for 1.9 percentage points of the total's increase. A longer factory sector workweek added 0.7 points. More building permits added 0.4 points to the total's gain and higher stock prices added 0.2 points. These gains were offset by a lower ISM new orders reading which sapped 0.5 points from the index change. Consumer expectations for business/economic conditions also eroded. The interest rate spread between 10-year Treasuries and Fed funds added slightly to the index while other components similarly had little effect.

Three-month growth in the leading index of -36.5% (AR) compared to a record decline of 43.5% in April.

The Index of Coincident Economic Indicators increased 1.1% (-10.3% y/y) last month after falling a record 10.4% in April, revised from -8.9%. It was the first increase in three months. Gains in payroll employment added one percentage point to the index. Industrial production also rose. These increases were offset by declines in personal income less transfer payments and manufacturing & trade sales.

Three-month growth in the coincident index of -38.5% (AR) followed the record 40.6% plunge in April.

The Index of Lagging Economic Indicators declined 1.9% during May (+3.6% y/y) after rising 1.7% in April, revised from 4.1%. Contributing negatively to the index change was the average duration of unemployment. It accounted for virtually all of the index decline. Six-month growth in the services CPI also subtracted slightly as it has for the last three months. Other components of the series had little influence on the lagging index change.

Three-month growth in the lagging index fell to 9.1% (AR) from the record 19.3% in April.

The ratio of coincident-to-lagging economic indicators is considered another leading indicator of economic activity. It stabilized near its record 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 (%) May Apr Mar May Y/Y 2019 2018 2017
Leading 2.8 -6.1 -7.5 -10.6 1.6 5.7 3.9
Coincident 1.1 -10.4 -2.2 -10.3 1.8 2.5 2.2
Lagging -1.9 1.7 2.4 3.6 2.8 2.5 2.4
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