Leading index continues to forecast U.S. growth

A monthly measure of future economic activity in the United States continues to rise, signalling growth despite weakness in some leading indicators and recent volatility in financial markets.

The Conference Board reported that its Leading Economic Indicator (LEI) advanced a half a percent to 115.8 in July. The latest gain follows an increase of a full point over the previous two months.

“With the exception of the money supply and interest rate components, other leading indicators show greater weakness — consistent with increasing concerns about the health of the economic expansion. Despite rising volatility, the leading indicators still suggest economic activity should be slowly expanding through the end of the year,” said Ataman Ozyildirim, an economist with the Conference Board, a business research and membership group.

The LEI has increased 2.9 percent over the past six months, slightly less than the 3.2 percent gain in the previous six months.

Ken Goldstein, another economist wit the Conference Board, said economic growth remains slow with no indication of accelerating. “The gains in the LEI are modest, especially the nonfinancial indicators. Despite these growing risks, the economy should continue to expand at a modest pace through the fall.”

For July, six of the 10 indicators used in the LEI advanced, including the interest rate spread on 10-year treasury bonds, money supply, new orders for manufactured capital and consumer goods and stock prices. Moreover, average weekly initial claims for unemployment benefits were down. The retreating indicators were building permits, consumer expectations and supplier deliveries. Average manufacturing hours held steady.

The Coincident Economic Index (CEI), a measure of current economic performance, rose three-tenths of a percent to 103.3 in July. Over the past six months, the CEI has gained 0.8 percent.

All four indicators used in the CEI advanced in July: nonfarm payrolls, personal income, productivity and sales.

The Lagging Economic Index (LAG), a measure of past performance, increased two-tenths of a percent to 110 in July. The LAG rose a total of eight-tenths of percent over the previous two months.

For July, two of seven indicators of the LAG advanced — business loans and consumer credit. Labor costs retreated and the average duration of unemployment increased. Three more indicators remained unchanged — average prime interest rate, inventories and the price of services.