Leading index signals growth in U.S.

A monthly index forecasting economic performance in the United States has increased, signalling growth in the year ahead.

The Conference Board reported it Leading Economic Index (LEI) rose a half a percent to 93.9 in December. Separate measures of current and past performance also increased.

“The latest data suggest that a pickup in domestic growth is now more likely compared to a few months ago,” said Ken Goldstein, an economist with the Conference Board, a business research and membership group.

“Housing, which has long been a drag, has turned into a positive for growth and will help improve consumer balance sheets and strengthen consumption. However, for growth to gain more traction, we also need to see better performance on new orders and an acceleration in capital spending.”

Over the past six months, the LEI has increased 1.3 percent, up from a half a percent during the previous six months.

For December, five of 10 indicators used in calculating the LEI

advanced: building permits, the interest rate spread, a leading credit index and stock prices. A drop in average weekly initial claims for unemployment benefits also bolstered the index. Three more indicators

retreated: consumer expectations, new orders for manufactured capital goods and a new orders index. Two  indicators held steady: average weekly manufacturing hours and new orders for manufactured consumer goods.

The Coincident Economic Index (CEI), a measure of current economic activity, rose two-tenths of a percent to 104.9 in December. The CEI has gained nine-tenths of a percent over the past six months.

For December, all four indicators of the CEI advanced: industrial production, nonfarm payrolls, personal income and sales.

The Lagging Economic Index (LAG), a measure of past economic performance, climbed seven-tenths of a percent to 117.5 in December.

The LAG has climbed 1.3 percent over the past three months.

For December, five of seven components of the LAG increased: commercial and industrial financing, consumer financing, the cost of services and inventories. What’s more, the average duration of unemployment fell.

Labor costs pulled down the index, while the average prime rate charged by banks remained unchanged.

 

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