Leading index signals slowing growth in U.S.

Ataman Ozyildirim
Ataman Ozyildirim

A monthly index forecasting economic conditions in the United States has edged down, signaling what could be slowing growth in the months ahead.

The Conference Board reported its Leading Economic Index (LEI) slipped a tenth of a percent to 111.7 in December. Separate measures of current and past conditions increased.

The latest indexes incorporate forecasts and advance reports because the information normally used wasn’t available because of the partial government shutdown.

Ataman Ozyildirim, director of economic research at the Conference Board, said recent moderation in the Leading Economic Index suggests economic growth could be slowing. “While the effects of the government shutdown are not yet reflected here, the LEI suggests that the economy could decelerate towards 2 percent growth by the end of 2019.”

The LEI  increased 1.5 percent over the second half of 2018, slower than the 2.7 percent gain over the first half of 2018. Strengths among the leading indicators remain more widespread than weaknesses, however.

Gross domestic product, the broad measure of goods and services produced in the country, grew at annual rate of 3.4 percent during the third quarter of 2018 after expanding 4.2 percent in the second quarter.

For December, six of 10 indicators of the LEI advanced, including consumer expectations, interest rate spread, a leading credit index and new orders for both consumer and capital goods. A decline in average weekly claims for unemployment benefits also bolstered the index. Building permits, a new orders index and stock prices retreated. Average weekly manufacturing hours held steady.

The Coincident Economic Index, a measure of current conditions, rose two-tenths of a percent to 105.1. The index has gained 1.2 percent over the past six months.

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

The Lagging Economic Index, a measure of past conditions, rose a half a percent to 106.7. The index has increased 1.6 percent over the past three months.

For December, six of seven components of the index advanced: the average prime rate charged by banks, consumer credit, the cost of both labor and services, industrial financing and inventories. An increase in the average duration of unemployment pulled down the index.