Leading index signals U.S. growth, but at a slowing pace

An index forecasting economic conditions in the United States continues to signal growth, albeit at what could be a slowing pace.

Ataman OzyildirimThe Conference Board reported its Leading Economic Index (LEI) rose five-tenths of a percent to 111.8 in September. A separate measure of current conditions edged up, while a measure of past conditions slipped.

Ataman Ozyildirim, director and global research chairman at the Conference Board, said the LEI suggests the business cycle remains on a strong growth trajectory heading into 2019. “However, the LEI’s growth has slowed somewhat in recent months, suggesting the economy may be facing capacity constraints and increasingly tight labor markets,” Ozyildirim said.

The LEI has increased 2.8 percent over the past six months, less than the 4.1 percent gain over the previous six-month period. Strengths among leading indicators remain widespread, however. By comparison, gross domestic product grew at an annual rate of 4.2 percent in the second quarter after increasing 2.2 percent in the first quarter.

For September, eight of the 10 indicators of the LEI advanced, including consumer expectations, interest rate spread, leading credit and new orders indexes, new orders for capital and consumer goods and stock prices. A decline in average weekly claims for unemployment benefits also boosted the index. Average weekly manufacturing hours and building permits retreated.

The Coincident Economic Index, a measure of current conditions, edged up a tenth of a percent to 104.4. The index has increased 1.1 percent over the past six months.

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

The Lagging Economic Index, a measure of past conditions, slipped a tenth of a percent to 105.3. The index has edged down a tenth of a percent over the past three  months.

For September, just two of seven components of the index advanced — consumer credit and the average interest prime rate charged by banks. The cost of labor and services declined, as did industrial financing. An increase in the average duration of unemployment also pulled down the index. Inventories held steady.