Leading index forecasts growth, but at a slowing pace

A monthly index forecasting economic conditions in the United States continues to rise and signal growth, although at what could be a slower pace.

The Conference Board Leading Economic Index rose two-tenths of a percent to 121.4 in February. Separate measures of current and past economic performance also increased.

The leading increase has increased 2.4 percent over the past six months, slower than the 3.7 percent gain in the previous six-month period. By comparison, gross domestic product rose at an annual rate of 2.2 percent in the fourth quarter of 2014 after a 5 percent gain in the third quarter.

“Widespread gains among the leading indicators continue to point to short-term growth,” said Ataman Ozyildirim, an economist at the Conference Board, a business research and membership association.

“However, easing in the LEI’s six-month change suggests that we may be entering a period of more moderate expansion,” Ozyildirim added. “With the February increase, the LEI remains in growth territory. But weakness in the industrial sector and business investment is holding economic growth back despite improvements in labor markets and consumer confidence.”

Seven of 10 indicators of the Leading Economic Index advanced in February: building permits, consumer expectations, interest rate spread, a leading credit index, new orders for both consumer and capital goods and stock prices. Average weekly manufacturing hours and a new orders index declined. An increase in average weekly initial claims for unemployment benefits also pulled down the index.

The Coincident Economic Index, a measure of current conditions, rose two-tenths of a percent to 111.9. The index has increased 1.6 percent over the past six months.

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

The Lagging Economic Index, a measure of past performance, rose three-tenths of a percent to 115.8. The index has increased eight-tenths of a percent over the past three months.

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