Leading index slips, but still forecasts growth

A monthly index forecasting economic performance in the United States has slipped, but still signals moderate growth in the months ahead.

The Conference Board reported that its Leading Economic Index decreased two-tenths of a percent to 123.3 in September. Separate measures of both current and past economic performance increased.

“Despite September’s decline, the U.S. LEI still suggests economic expansion will continue,” said Ataman Ozyildirim, an economist with the Conference Board, a business research and membership association. “The recent weakness in stock markets, the manufacturing sector and housing permits was offset by gains in financial indicators and to a lesser extent improvements in consumer expectations and initial claims for unemployment insurance.”

Ozyilidirim said the U.S. economy remains on track to grow about 2.5 percent in the coming quarters despite a mixed global outlook.

The Leading Economic Index has increased 1.5 percent over the past six months, slower than the 1.9 percent gain over the six months before that. Strengths among leading indicators remain more widespread than weaknesses. Gross domestic product, the broad measure of goods and services produced in the country, increased at an annual rate of 3.9 percent during the second quarter.

For September, six of 10 components of the Leading Economic Index advanced, including consumer expectations for business conditions, interest rate spread, a leading credit index and new orders for both consumer and capital goods. A decrease in average weekly initial claims for unemployment benefits also bolstered the index. Average weekly manufacturing hours, building permits, a new orders index and stock prices all declined.

The Coincident Economic Index, a measure of current performance increased two-tenths of a percent to 112.8. The index has increased nine-tenths of a percent over the past six months.

For September, three of four components of the index advanced — nonfarm payrolls, personal income and sales. Industrial production retreated.

The Lagging Economic Index, a measure of past performance, increased a half of a percent to 119. The index has gained a full percentage point over the past three months.

For September, five of seven components of the index increased, including consumer credit, cost of services, labor costs and inventories. A decrease in the average duration of unemployment also buoyed the index. Commercial and industrial financing declined, while the average prime interest rate charged by banks held steady.