Leading index signals slowing growth

Ataman Ozyildirim

A monthly index forecasting economic conditions has declined for a third straight month, signaling slowing growth in the United States.

The Conference Board reported its Leading Economic Indicator (LEI) slipped a tenth of a percent to 111.97 in October. The index has edged down a tenth of a percent over the past six months, moving into negative territory for the first time since May 2016.

A separate measure of current conditions held steady in October, while a measure of past conditions increased.

“The LEI suggests that the economy will end the year on a weak note, at just below 2 percent growth,” said Ataman Ozyildirim, senior director of economic research at the Conference Board, a business research and membership association.

Manufacturing conditions remain weak, Ozyildirim said, while the labor market has softened.

Gross domestic product, the broad measure of goods and services produced in the country, grew at an annual rate of 1.9 percent in the third quarter after increasing 2 percent in the second quarter.

For October, five of 10 indicators of the LEI advanced, including building permits, consumer expectations, a leading credit index and new orders for both capital goods and consumer goods. Average manufacturing hours retreated, as did the interest rate spread, a new orders index and stock prices. An increase in initial claims for unemployment insurance also pulled down the index.

The Coincident Economic Index, a measure of current performance, remained unchanged at 106.5. The index has increased eight-tenths of a percent over the past six months.

For October, three of four indicators of the index advanced: income, payrolls and sales. Industrial production declined.

The Lagging Economic Index, a measure of past performance, edged up a tenth of a percent to 108.1. The index has decreased four-tenths of a percent over the past three months.

For October, three of seven indicators of the index advanced, including the cost of services and personal credit. A decrease in the average duration of unemployment also bolstered the index. The average prime rate charged by banks declined, as did commercial and industrial financing, inventories and the cost of labor.