Leading index rises, but signals slowing ahead

Ataman Ozyildirim

A monthly index forecasting economic conditions in the United States continues to increase, but at a pace that signals slowing.

The Conference Board reported its Leading Economic Index (LEI) rose six-tenths of a point to 109.1 in November. The gain was the seventh in as many months.

“The U.S. LEI continued rising in November, but its pace of improvement has been decelerating in recent months, suggesting a significant moderation in growth as the U.S. economy heads into 2021,” said Ataman Ozyildirim, senior director of economic research at the Conference Board.

A decrease in average working hours in manufacturing and worsening consumer outlook reflect the risks associated with a surge in COVID-19 cases and high unemployment, Ozyildirim said.

The LEI increased 9.3 percent over the past six months, reversing a decline of 10.6 percent over the six months before that.

Gross domestic product, the broad measure of goods and services produced in the country, increased at an annual rate of 33.1 percent in the third quarter after decreasing 31.4 percent in the second quarter.

For November, seven of the 10 indicators of the LEI advanced, including building permits, interest rate spread, leading credit and new orders indexes, new orders for consumer goods and stock prices. A decrease in average weekly claims for unemployment insurance also bolstered the index. Average weekly manufacturing hours, consumer expectations and new orders for capital goods retreated.

The Coincident Economic Index, a measure of current conditions, rose two-tenths of a percent to 103.2. The index has increased 8.3 percent over the past six months.

For November, all four indicators advanced: industrial production, nonfarm payrolls, personal income and sales.

The Lagging Economic Index, a measure of past performance, declined four-tenths of a percent to 106.9. The index decreased a half of a percent over the past three months.

For November, three indicators retreated, including commercial and industrial lending and the cost of labor. An increase in the average duration of unemployment also pulled down the index. The cost of services advanced. The average prime rate, inventories and consumer credit held steady.