Leading economic index reflects slowing growth, but not recession

A monthly measure of future economic performance in the United States continues to reflect a weak economy, but not one headed back into recession.

The Conference Board Reported that its Leading Economic Index (LEI) edged up a tenth of a percent in July. Measures of current and past economic performance also increased.

“The indicators point to a slow expansion through the end of the year,” said Ken Goldstein, an economist with the business membership and research group.

“With inventory rebuilding moderating, the industrial core of the economy has moved to a slower pace. There appears to be no change in the pace of the service sector. Combined, the result is a weak economy with little forward momentum,” Goldstein said. “However, the good news is that the data do not point to a recession.”

Ataman Ozyildrim, another economist with the Conference Board, said the LEI remains well below levels before the recession, but continues on an upward trend that began in late 2009.

“The economy should continue growing, albeit slowly,” Ozyildrim said.

The LEI now stands at 109.8. Based on revised information, the index slipped three-tenths of a percent in June and rose a half a percent in May. Over the past six months, the index has increased 2 percent.

For July, five of 10 indicators used in the LEI advanced, including interest rate spread, average weekly manufacturing hours, vendor performance and new orders for nondefense capital goods. Moreover, average weekly initial claims for unemployment benefits declined.

Four indicators retreated: consumer expectations, building permits, real money supply and stock prices. New orders for manufactured consumer good and materials held steady.

The Conference Board Coincident Economic Index (CEI), a measure of current economic performance, rose two-tenths of a percent to 101.4 in July. The CEI fell a combined half of a percent in June and May, but has increased 1.3 percent over the past six months.

For July, three of four indicators of the CEI advanced: industrial production, personal income less transfer payments and manufacturing and trade sales. Nonfarm payrolls were down.

The Conference Board Lagging Economic Index (LAG) rose four-tenths of a percent to 107.9 in July. Three of seven indicators advanced with changes in the Consumer Price Index for services and labor cost per unit of output. The average duration of unemployment was down. Meanwhile, the level of outstanding commercial and industrial loans was down and three other indicators held steady.