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Economy in Brief

U.S. Leading Economic Indicators Increase
by Tom Moeller  September 20, 2018

The Conference Board's Composite Index of Leading Economic Indicators increased 0.4% (6.4% y/y) during August after a 0.7% July gain, revised from 0.6%. A 0.5% rise had been expected in the Action Economics Forecast Survey. The index is comprised of 10 components which tend to precede changes in the overall economy.

Movement amongst the components of the index was mixed last month. Improvement was led by a higher ISM new orders index, the leading credit index, a steeper interest rate spread between 10-Year Treasuries & Fed funds, stronger stock prices and improved consumer expectations for business/economic conditions. Also, initial claims for unemployment insurance fell and orders for consumer goods & materials improved. Fewer new orders for nondefense capital goods excluding aircraft and the length of the average workweek for production workers had negative effects.

Three-month growth in the leading index strengthened to 6.7% (AR), but remained below its 10.3% December 2017 peak rate of change.

The Index of Coincident Economic Indicators increased a steady 0.2% (2.5% y/y) in August. Each of the index components contributed positively to the index including changes in personal income less transfer payments, industrial production, nonagricultural payroll employment and manufacturing & trade sales.

Three-month growth in the coincident index of 2.7% (AR) was improved from 1.6% growth early in the year.

The Index of Lagging Economic Indicators increased 0.2% (2.3% y/y) last month after an unrevised 0.2% July decline. The average duration of unemployment and the ratio of consumer installment credit to personal income contributed positively to the index change. Commercial & industrial loans outstanding and the change in the services CPI contributed negatively.

Three-month growth in the lagging index fell sharply to 0.8%, its weakest growth since November and down from 4.7% in June.

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 at a slightly improved 99.0 last month.

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.

How Likely Is a Return to the Zero Lower Bound? from the Federal Reserve Bank of Richmond can be found here.

Business Cycle Indicators (%) Aug Jul Jun Aug Y/Y 2017 2016 2015
Leading 0.4 0.7 0.5 6.4 4.1 1.2 4.2
Coincident 0.2 0.2 0.3 2.5 1.8 1.3 2.2
Lagging 0.2 -0.2 0.2 2.3 2.6 2.9 3.7
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