Leading index: Economic expansion likely to continue

Ataman Ozyildirim
Ataman Ozyildirim

An index forecasting economic conditions has increased for a third consecutive month, signaling what likely will be the longest expansion in United States history.

The Conference Board reported its Leading Economic Index (LEI) rose two-tenths of a percent to 112.1 in April. The gain follows what was a total of a half a percent increase in March and February.

“Stock prices, financial conditions and consumers’ outlook on the economy buoyed the U.S. LEI, although the manufacturing sector showed continuing weakness,” said Ataman Ozyildirim, director of economic research at the Conference Board, a business research and membership group.

“The Conference Board expects economic growth to moderate toward 2 percent by year end,” Ozyildirim said. “The current expansion will enter its 11th year in July, becoming the longest expansion in U.S. history.”

The LEI has increased six-tenths of a percent over the past six months, a fraction of the 2.1 percent gain over the six month before that. Still, strengths among the leading indicators remain more widespread than weaknesses.

Gross domestic product, the broad measure of goods and services produced in the country, increased at an annual rate of 3.2 percent in the first quarter of 2019 after gaining 2.2 percent in the fourth quarter of 2018.

For April, six of 10 indicators of the LEI advanced, including consumer expectations, interest rate spread, a leading credit index, new orders for consumer goods and stock prices. A decrease in claims for unemployment benefit also bolstered the index. A new orders index and new orders for capital goods declined. Average weekly manufacturing hours held steady.

The Coincident Economic Index, a measure of current conditions, rose a tenth of a percent to 105.7. The index has increased seven-tenths of a percent over the past six months.

For April, three of four indicators advanced: nonfarm payrolls, personal income and sales. Industrial production retreated.

The Lagging Economic Index, a measure of past performance, slipped a tenth of a percent to 107.2. The index has increased four-tenths of a percent over the past three months.

For April, three of seven indicators advanced: consumer credit, the cost of services and inventories. Commercial and industrial financing retreated, as did labor costs. An increase in the average duration of unemployment also pulled down the index. The average prime interest rate charged by banks remained unchanged.