Leading index forecasts growth, but at a slowing pace

Ataman Ozyildirim
Ataman Ozyildirim

A monthly 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 two-tenths of a percent to 111.8 in November. Separate measures of
current and past conditions increased.

“Despite the recent volatility in stock prices, the strengths among the leading indicators have been widespread. Solid GDP growth at about 2.8 percent should continue in early 2019. But the LEI suggests the economy is likely to moderate further in the second half of 2019,” said Ataman Ozyildirim, director of economic research at the Conference Board, a business research and membership organization.

The LEI has increased 2.2 percent over the past six months, slower than the 2.9 percent gain over the six months before that. However, strengths among leading indicators remain more widespread than weaknesses.

Gross domestic product, the broad measure of goods and services produced, grew at an annual rate of 3.5 percent in the third quarter after expanding 4.2 percent in the second quarter.

For November, seven of 10 indicators of the LEI advanced, including building permits, consumer expectations, interest rate spread, leading credit and new orders indexes and new orders for consumer and capital goods. An increase in average weekly claims for unemployment benefits pulled down the index, as did decreases in average weekly manufacturing hours and stock prices.

The Coincident Economic Index, a measure of current conditions, rose two-tenths of a percent to 104.9. The index has gained
1.3 percent over the past six months.

For November, 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-tenths of a percent to 106. The index has increased seven-tenths of a percent over the past three months.

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