U.S. Leading Economic Indicators Decline Further in October
- Leading Index continues to portend economic downturn.
- Stability in Coincident Index follows three months of increase.
- Lagging Index increase suggests rising economic excess.
The U.S. Leading Economic Index fell 0.8% during October following an unrevised 0.7% September decline and 0.4% August drop, according to The Conference Board. It was the largest decline in six months. A 0.6% weakening had been expected in the Action Economics Forecast Survey. The index has declined in each month since April 2022 and stood at the lowest level since May 2020. On a six-month basis, the index declined 6.4%, less than its biggest decline of 9.0% in December of last year.
Seven of the ten index components made negative contributions to the overall index in October, led by the ISM new orders index, lower stock prices, weakened consumer expectations for business /economic conditions & an inverted yield curve. More claims for unemployment insurance, the interest rate spread between the 10-year Treasury bond & Fed funds and the leading credit index had modest negative effects on the total. The length of the average workweek and nondefense capital goods orders excluding aircraft had no effect on the index’s change last month while new orders for consumer goods had a negligible positive effect on the index change.
The Coincident Economic Index held steady in October after rising 0.2% in September, revised from 0.3%, and an unrevised 0.1% August uptick. Six-month growth in the index eased slightly to 1.8% from 2.0%, though these growth rates are increased from earlier in the year. Three of the four component series made positive contributions in October including payroll employment, personal income less transfers and manufacturing & trade sales. Industrial production contributed negatively.
The Lagging Economic Index rose 0.1% last month, the same as in September which was revised from 0.2%. Six-month growth rose to 0.5%, its quickest since February. Three of the index’s seven components made positive contributions in October, while two made negative contributions. Two were unchanged. Of the components, slower labor cost growth was offset by faster growth in the services CPI. This index has been fairly steady since March.
The ratio of the coincident index to the lagging index is also viewed as a leading indicator as it measures excesses in the economy versus its actual performance. This measure eased 0.1% last month and has been little changed over the last three months. It had been rising modestly since 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 website for coverage of leading indicator series from around the world.
Tom MoellerAuthorMore in Author Profile »
Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.