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Economy in Brief

U.S. Leading Economic Indicators Post Another Firm Increase
by Tom Moeller  May 17, 2018

The Conference Board's Composite Index of Leading Economic Indicators increased 0.4% last month, the same as during March which was revised from 0.3%. The y/y change strengthened to 6.4% from 4.1% during all of last year. The latest increase matched expectations in the Action Economics Forecast Survey. The index is comprised of 10 components which tend to precede changes in the overall economy.

All but two of the component series contributed positively to the change in the leading index last month. Positive contributions to the index were made by the average workweek, a decline in initial unemployment insurance claims, a rise in the ISM new orders index, a steeper interest rate spread between 10-Year Treasuries & Fed funds, firmer consumer expectations for business/economic conditions, higher new orders for consumer goods, more new orders for nondefense capital goods excluding aircraft, the leading credit index and new orders for consumer goods. Contributing negatively to the index change were fewer building permits and lower stock prices.

Three-month growth in the leading index eased to 6.1% (AR) versus its 9.9% December peak.

The Index of Coincident Economic Indicators increased 0.3% (2.2% y/y) during April following two months of 0.2% gain. Each of the component series contributed positively to the total's rise including personal income less transfer payments, business sales, payroll employment and industrial production.

The three-month gain in the index of 2.8% (AR) was the strongest since December.

The Index of Lagging Economic Indicators rose 0.3% last month (2.4% y/y) after a 0.1% March dip, revised from +0.1%. All but two of the seven component series contributed positively to the change in the index. The average duration of unemployment, the business inventory/sales ratio, C&I loans outstanding, the ratio of consumer installment credit to personal income contributed positively. Negative effects on the lagging index were provided by the change in the services CPI and the change in  unit labor costs per unit of output.

Three-month growth in the lagging index fell sharply to 1.9%, its weakest since November.

The ratio of coincident-to-lagging indicators is often considered to be a leading indicator of economic activity. As economic slack diminishes relative to current performance, the ratio will rise. It held steady last month at a low 98.9.

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 (%) Apr Mar Feb Apr Y/Y 2017 2016 2015
Leading 0.4 0.4 0.7 6.4 4.1 1.2 4.2
Coincident 0.3 0.2 0.2 2.2 1.8 1.3 2.2
Lagging 0.3 -0.1 0.3 2.4 2.6 2.9 3.7
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