Leading index forecasts growth, but at a slowing pace

Ataman Ozyildirim
Ataman Ozyildirim

An index forecasting economic conditions in the United States continues to signal growth, but at a slowing pace.

The Conference Board reported its Leading Economic Index (LEI) edged up a tenth of a percent to 112.1 in October. Separate measures of current conditions and past conditions also increased.

“The index still points to robust economic growth in early 2019. But the rapid pace of growth may already have peaked,” said Ataman Ozyildirim, director and global research chairman at the Conference Board, a business research and membership organization. “While near-term economic growth should remain strong, longer-term growth is likely to moderate to about 2.5 percent by mid to late 2019.”

The LEI has increased 2.6 percent over the past six months, less than the 3.2 percent gain over the previous six-month period. Strengths among leading indicators remain widespread, however. By comparison, gross domestic product grew at an annual rate of 3.5 percent in the third quarter after increasing 4.2 percent in the second quarter.

For October, five of the 10 indicators of the LEI advanced, including consumer expectations, interest rate spread, leading credit and new orders indexes and new orders for capital goods. Building permits and stock prices declined, while an increase in average weekly claims for unemployment benefits also pulled down the index. Average weekly manufacturing hours and new orders for consumer goods held steady.

The Coincident Economic Index, a measure of current conditions, rose two-tenthes of a percent to 104.7. The index has increased 1.1 percent over the past six months.

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

The Lagging Economic Index, a measure of past conditions, rose four-tenthes of a percent to 105.5. The index has increased a half of a percent over the past three months.

For October, four of seven components of the index advanced, including the average interest prime rate charged by banks, consumer credit and the cost of services. A decrease in the average duration of unemployment also bolstered the index. The cost of labor and industrial financing declined. Inventories held steady.