Leading index forecasts growth, but at a slowing pace

A monthly index forecasting economic conditions in the United States continues to rise, although at a slower pace that signals weaker growth.

The Conference Board Leading Economic Index rose two-tenths of a point to 121.4 in March. Separate measures of current and past economic conditions also advanced.

“Although the leading economic index still points to a moderate expansion in economic activity, its slowing growth rate over recent months suggests weaker growth may be ahead,” said Ataman Ozyildirim, an economist with the Conference Board, a business research and membership association.

“Building permits was the weakest component this month, but average working hours and manufacturing new orders have also slowed the LEI’s growth over the last six months,” Ozyildirim said.

The leading index has increased 1.8 percent over the past six months, about half the 3.3 percent gain for the six-month period before that.

By comparison, gross domestic product, the broad measure of goods and services produced in the country, grew at an annual rate of 2.2 percent in the fourth quarter of 2014 after increasing 5 percent in the third quarter.

For March, six out of 10 indicators of the leading index advanced, including consumer expectations, interest rate spread, a leading credit index and new orders for capital and consumer goods. A decrease in average weekly initial claims for unemployment benefits also bolstered the index. Average weekly manufacturing hours, building permits and a new orders index retreated. Stock prices remain essentially unchanged.

The Coincident Economic Index, a measure of current conditions, edged up a tenth of a point to 112. The index has increased 1.4 percent over the past six months, slightly ahead of the 1.3 percent gain for the previous six months.

For March, three of four indicators of the index increased: nonfarm payrolls, personal income and sales. Industrial production declined.

The Lagging Economic Index, a measure of past conditions, rose four-tenths of a point to 116.2. The index has gained 1 percent over the past three months.

For March, four of seven indicators increased, including commercial and industrial financing, consumer credit and labor costs. A decrease in the average duration of unemployment also bolstered the index. The cost of services, inventories and the average prime rate charged by banks all held steady.