Leading index signals growth through 2011

A monthly index forecasting economic performance in the United States continues to climb to record heights, signaling strengthening business conditions through at least 2011.

The Conference Board reported that its Leading Economic Indicator (LEI) rose to 114.1 in March, up four-tenths of a percent from February. With a total gain of 1.6 percent over the past three months, the LEI remains at at an all-time historical high

Measures of current and past economic performance also increased in March, according to the business research and membership group

Ken Goldstein, an economist with the Conference Board, said the LEI points to sustained economic growth through the end of the year, with some caveats.

“Global disruptions, including unrest in the Middle East, rising oil prices and the Japan earthquake, may have some repercussions,” Goldstein said. “However, it remains to be seen what the impact of these shocks will be on the United States and the broader global economy.”

For March, six of 10 indicators of the LEI advanced: building permits, interest rate spread, new orders for consumer goods and materials, manufacturing hours and supplier deliveries. Moreover, average weekly claims for unemployment insurance were down.

The retreating indicators were consumer expectations, new orders for capital goods, the real money supply and stock prices.

Over the past six months, the pace of growth in the LEI has accelerated to

3.8 percent, up from 1.2 percent in the previous six months. While the six-month growth rate of the index dipped slightly in March it remains faster than the second half of 2010. Moreover, strengths among the indicators have remained fairly widespread in recent months.

By comparison, gross domestic product increased at an annual rate of 3.1 percent during the fourth quarter of 2010 after growing 2.6 percent in the third quarter.

The Coincident Economic Index (CEI), a measure of current economic conditions, climbed to 102.9, up two-tenths of a percent from February and 1.5 percent over the past six months.

For March, all four indicators of the CEI advanced: payrolls, personal income, production and sales.

The Lagging Economic Index (LAG), a measure of past performance, rose to 108.3, up four-tenths from February. The LAG has gained three-tenths of a percent over the past three months.

For March, three of seven components advanced: business loans, labor costs and the price of services. Consumer credit decreased, while the average duration of unemployment increased. Inventories and the average prime interest rate held steady.