Leading index rises, but signals slowing

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) increased seven-tenths of a percent to 108.2 in October. The gain was the sixth in as many months.

But the slowing pace of growth in the index suggests slowing for the economy, said Ataman Ozyildirim, senior director of economic research for the Conference Board. “Furthermore, downside risks to growth from a second wave of COVID-19 and high unemployment persist.”

The Conference Board projected the economy will expand in the fourth quarter, but likely not more than at an annual rate of 2.2 percent, Ozyildirim said.

The LEI increased 11.7 percent over the past six months, nearly offsetting a 13 percent decrease over the six months before that.

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

For October, seven of 10 indicators of the LEI advanced, including average weekly manufacturing hours, 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. New orders for capital goods retreated. Building permits and consumer expectations for business conditions held steady.

The Coincident Economic Index, a measure of current conditions, rose a half percent to 102.7. The index has increased 10.4 percent over the past six months.

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

The Lagging Economic Index, a measure of past performance, edged up a tenth of a percent to 107.1. The index has decreased four-tenths of a percent over the past three months.

For October, two of seven indicators of the index advanced: consumer credit and the cost of labor. Commercial and industrial lending and the cost of labor retreated. An increase in the average duration of unemployed also pulled down the index. The average prime rate charged by banks and inventories remained unchanged.