Leading index forecasts economic growth through 2018

Despite downturns in the stock market and residential construction, an index forecasting economic conditions in the United States continues to forecast growth through the coming year.

The Conference Board reported its Leading Economic Index (LEI) rose six-tenths of a percent to 108.7 in February. Separate measures of current and past conditions also increased.

“The U.S. LEI rose again despite a sharp downturn in stock markets and weakness in housing construction in February. The LEI points to robust economic growth throughout 2018,” said Ataman Ozyildirim, an economist with the Conference Board, a business research and membership association. “Its six-month growth rate has not been this high since the first quarter of 2011.”

With gains in each of the last five months, the Leading Economic Index has increased 4 percent over the past six months. That’s nearly double the pace of the 2.4 percent gain over the previous six-month span. Moreover, strength among leading indicators remains widespread.

Gross domestic product, the broad measure of goods and services produced in the country, grew at an annual rate of 2.5 percent in the fourth quarter of 2017 after increasing 3.2 percent in the third quarter.

For February, eight of the 10 indicators of the Leading Economic Index advanced, including average weekly manufacturing hours, consumer expectations, interest rate spread, leading credit and new orders indexes, and new orders for capital and consumer goods. A decline in average weekly initial claims for unemployment insurance also bolstered the index. Building permits and stock prices retreated.

The Coincident Economic Index, a measure of current conditions, rose three-tenths of a percent to 103.3 The index has increased 1.5 percent over the past six months.

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

The Lagging Economic Index, a measure of past performance, rose four-tenths of a percent to 104.3. The index has increased 1.1 percent over the past three months.

For February, four of seven components of the index advanced, including commercial and industrial financing, consumer credit and inventories. A decrease in the average duration of unemployment also bolstered the index. The cost of services and labor retreated. The average prime rate charged by banks remained steady.