Leading index increases, but still signals slowing growth

A monthly index forecasting economic conditions in the United States has increased, but continues to signal slowing growth.

The Conference Board reported its Leading Economic Index (LEI) rose four-tenths of a percent to 111.9 in March. Separate measures of current and past performance also increased.

“The U.S. LEI picked up in March with labor markets, consumers’ outlook and financial conditions making the largest contributions,” said Ataman Ozyildirim, director of economic research at the Conference Board, a business research and membership group.

“Despite the relatively large gain in March, the trend in the U.S. LEI continues to moderate, suggesting that growth in the U.S. economy is likely to decelerate toward its long-term potential of about 2 percent by year-end,” Ozyildirim said.

The LEI has increased four-tenths of a percent over the past six months, a fraction of the 2.8 percent gain over the six months before that. Strengths and weaknesses among the leading indicators have balanced out.

Gross domestic product, the broad measure of goods and services produced in the country, increased at an annual rate of 2.2 percent in the fourth quarter of 2018 after increasing 3.4 percent in the third quarter.

For March, eight of 10 indicators of the LEI advanced, including consumer expectations, interest rate spread, leading credit and new orders indexes, new orders for capital and consumer goods and stock prices. A decrease in claims for unemployment benefits also bolstered the index. Average manufacturing hours and building permits held steady.

The Coincident Economic Index, a measure of current conditions, rose a tenth of a percent to 105.8. The index has increased 1 percent over the past six months.

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

The Lagging Economic Index, a measure of past performance, rose a tenth of a percent to 107. The index has increased seven-tenths of a percent over the past three months.

For March, four of seven components of the index advanced: consumer credit, the cost of services, industrial financing and inventories. Retreating components included labor costs and an increase in the average duration of unemployment. The average prime interest rate charged by banks remained unchanged.