Leading index signals continued U.S. growth

Ataman Ozyildirim
Ataman Ozyildirim

An index forecasting economic conditions in the United States continues to signal growth.

The Conference Board reported its Leading Economic Index (LEI) rose four-tenths of a percent to 111.2 in August. The index remains well above its previous peak of 102.4 reached in March 2006.

“The leading indicators are consistent with a solid growth scenario in the second half of 2018. And at this stage of a maturing business cycle in the U.S., it doesn’t get much better than this,” said Ataman Ozyildirim, director of business cycles and growth research at the Conference Board, a business research and networking association.

The LEI has increased 2.5 percent over the past six months, slower than the 3.8  percent gain over the previous six-month period Strengths among leading indicators remain widespread, however.

Gross domestic product, the broad measure of goods and services produced in the country, grew at an annual pace of 4.2 percent during the second quarter after increasing 2.2 percent in the first quarter.

For August, seven of the 10 indicators of the Leading Economic Index advanced, including consumer expectations, interest rate spread, leading credit and new orders indexes, new orders for consumer goods and stock prices. A decrease in average weekly initial claims for unemployment benefits also boosted the index. Average weekly manufacturing hours, building permits and new orders for capital goods retreated.

The Coincident Economic Index, a measure of current conditions, increased two-tenths of a percent to 104.3. The index has increased 1.2 percent over the past six months.

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

The Lagging Economic Index, a measure of past performance, increased two-tenths of a percent to 105.4. The index has increased two-tenths of a percent over the past three months.

For August, just two of seven indicators of the index advanced, including consumer credit. A decrease in the average duration of unemployment also boosted the index. Commercial and industrial financing and the cost of labor and services declined. Inventories and the average prime interest rate charged by banks held steady.