Leading index signals growth through end of the year

Ataman Ozyildirim

An index forecasting economic conditions in the United States continues to increase, signaling growth for the remainder of the year.

The Conference Board Leading Economic Index rose nine-tenths of a percent to 117.1 in August. Separate measures of current and past performance also increased.

Ataman Ozyildirim, senior director of economic research at the Conference Board, said the Leading Economic Index remains on a rapidly rising trajectory. “While the Delta variant — alongside rising inflation fears — could create headwinds for labor markets and the consumer spending outlook in the near term, the trend in the LEI is consistent with robust economic growth in the remainder of the year,” he said.

Gross domestic product, the broad measure of goods and services produced in the country, is expected to increase on a year-over-year basis 6 percent in 2021 and 4 percent in 2020, Ozyildirim said.

GDP grew at an annual rate of 6.6 percent in the second quarter and 6.3 percent in the first quarter of 2021.

The Leading Economic Index has increased 6.4 percent over the past six months with widespread strengths among the indicators.

For August, eight of 10 indicators advanced, including building permits, interest rate spread, new orders for both consumer and capital goods, a new orders index and stock prices. A decrease in average weekly initial claims for unemployment benefits and a leading credit index also bolstered the index. Consumer expectations for business conditions declined. Averagely weekly manufacturing hours held steady.

The Coincident Economic Index rose two-tenths of a percent to 105.9. The index has increased 2.8 percent over the past six months.

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

The Lagging Economic Index edged up a tenth of a percent to 106.3. The index has increased a half of a percent over the past three months.

For August, three of seven components advanced: consumer credit, labor costs and inventories. Commercial and industrial financing and the cost of services retreated. An increase in the average duration of unemployment also pulled down the index. The average prime rate charged by banks remained unchanged.