A monthly index forecasting economic performance in the United States has increased sharply, a signal the pace of growth could accelerate.
The Conference Board reported that its Leading Economic Index climbed nine-tenths of a percent to 103.3 in July. With increases in each of the last six months, the index has advanced 4 percent over that span as nine out of 10 indicators advanced.
“The LEI improved sharply in July, suggesting that the economy is gaining traction and growth should continue at a strong pace for the remainder of the year,” said Ataman Ozyildirim, an economist at the Conference Board. “Although housing has been one of the weakest components this year, the sharp gain in building permits helped boost the LEI in July. Financial markets and labor market conditions have also supported recent gains, but business spending indicators remain soft and their contribution marginal.”
Ken Goldstein, another economist with the business research and membership association, agreed. “Although retail sales were a little disappointing, hiring and industrial activity improved. July’s increase in the LEI, coupled with its accelerating growth trend, points to stronger economic growth over the coming months.”
For July, seven indicators of the Leading Economic Index advanced: building permits, interest rate spread, new orders for consumer goods and materials, new orders and leading credit indexes and stock prices. A decrease in average weekly initial claims for unemployment benefits also bolstered the index. Three indicators retreated: average weekly manufacturing hours, consumer expectations for business conditions and new orders for capital goods.
The Coincident Economic Index, a measure of current conditions, rose two-tenths of a percent to 109.6 in July. The index has increased 1.8 percent over the past six months.
For July, all four indicators of the index advanced: industrial production, nonfarm payrolls, personal income and sales.
The Lagging Economic Index, a measure of past performance, increased two-tenths of a percent to 124.6 in July. The index has increased 1.1 percent over the past three months.
For July, three of seven indicators of the index advanced, including commercial and industrial financing and consumer credit. A decrease in the average duration of unemployment also pushed up the index. At the same time, the cost of services and labor both retreated. Inventories and the average prime rate charged by banks held steady.