Leading index signals more growth ahead

An index forecasting economic conditions in the United States continues to rise, signaling growth through at least the first half of the year.

The Conference Board reported its Leading Economic Index increased 1 percent to 108.1 in January. Separate measures of current and past conditions also edged up.

“The U.S. LEI accelerated further in January and continues to point to robust growth in the first half of 2018,” said Ataman Ozyildirim, an economist with the Conference Board, a business research and membership association. “While the recent stock market volatility will not be reflected in the U.S. LEI until next month, consumers’ and businesses’ outlook on the economy has been improving for several months and should not be greatly impacted.”

The index reflects strength in financial conditions as well as labor markets, manufacturing and residential construction, Ozyildirim said.

With gains in each of the last four months, the Leading Economic Index has increased 3.8 percent over the past six months. That’s a faster pace than the 2.3 percent gain over the previous six-month span.

Gross domestic product, the broad measure of goods and services produced in the country, grew at an annual rate of 2.6 percent in the fourth quarter of 2017 after increasing 3.2 percent in the third quarter.

For January, eight of the 10 indicators of the Leading Economic Index advanced, including building permits, consumer expectations, interest rate spread, leading credit and new orders indexes, new orders for capital goods and stock prices. A decline in average weekly initial claims for unemployment insurance also bolstered the index. Average weekly manufacturing hours and new orders for consumer goods held steady.

The Coincident Economic Index, a measure of current conditions, edged up a tenth of a percent to 103. The index has increased 1.2 percent over the past six months.

For January, three of four indicators of the index advanced: nonfarm payrolls, personal income and sales. Industrial production retreated.

The Lagging Economic Index, a measure of past performance, rose a tenth of a percent to 104. The index has increased nine-tenths of a percent over the past three months.

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