Leading index forecasts faster growth in 2014

A monthly index forecasting economic performance in the United States continues to rise, signaling faster growth in 2014. Challenges loom, however, including slow job growth, weak consumer demand and the prospect for more federal budget battles.

The Conference Board reported that its Leading Economic Index rose two-tenths of a percent to 97.5 in October. With bigger gains in September and August, the index has climbed at an annual rate of 5.1 percent over the past six months.

Separate measures of current and past economic performance also increased in October.

“The recent increase in the index supports our forecast that the U.S. economy is poised to grow somewhat faster at 2.3 percent in 2014 compared to 1.6 percent in 2013,” said Kathy Bostjancic, director of macroeconomic analysis at the Conference Board, a business research and membership association.

Ken Goldstein, an economist with the Conference Board, said the latest data reflects strengthening conditions, although challenges remain.

“Headwinds still persist from the labor market, accompanied by business caution and concern about federal budget battles. The biggest challenge to date has been relatively weak consumer demand, which continues to be retrained by weak wage growth and slumping confidence.”

For October, seven of the 10 indicators of the leading index advanced, including building permits, interest rate spread, leading credit and new orders indexes, new orders for capital and consumer goods and stock prices. An increase in average weekly claims for unemployment insurance pulled down the index, as did less upbeat consumer expectations for business conditions. Average weekly manufacturing hours held steady.

The Conference Board Coincident Economic Index, a measure of current economic performance, rose two-tenths of a percent to 106.9 in October.

The index has increased 1.1 percent over the past six months.

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

The Conference Board Lagging Economic Index, a measure of past economic performance, increased three-tenths of a percent to 119.7 in October.

The index has climbed 1 percent over the past three months.

For October, three of seven indicators of the index advanced, including consumer credit and inventories. A decrease in the average duration of unemployment also bolstered the index. Commercial and industrial financing declined, as did labor costs. The cost of services and average prime rate charged by banks remained unchanged.