Leading index slips, but still signals growth

A monthly index forecasting economic performance in the United States has slipped after four months of gains, but continues to signal growth.

The Conference Board reported that its Leading Economic Index edged down two-tenths of a percent to 123.3 in July. Separate measures of current and past economic activity both increased.

“The U.S. LEI fell slightly in July after four months of strong gains. Despite a sharp drop in housing permits, the U.S. LEI is still pointing to moderate economic growth through the reminder of the year,” said Ataman Ozyildirim, an economist with the Conference Board, a business research and membership association.

The Leading Economic Index has increased 1.7 percent over the past six months, slower than the 2.4 percent gain over the six months before that. Strengths among the indicators remain more widespread than weaknesses, however.

Gross domestic product, the broad measure of goods and services produced in the country, increased at an annual rate of 2.3 percent in the second quarter following a gain of six-tenths of a percent in the first quarter.

For July, seven of the 10 components of the index advanced, including consumer expectations for business conditions, interest rate spread, leading credit and new orders indexes and new orders for both consumer and capital goods. A decrease in average weekly initial claims for unemployment insurance also bolstered the index. Building permits and stock prices declined. Average weekly manufacturing hours held steady.

The Coincident Economic Index, a measure of current performance, edged up two-tenths of a percent to 112.5 in July. The index has increased seven-tenths of a percent over the past six months.

For July, all four components advanced: industrial production, nonfarm payrolls, personal income and sales.

The Lagging Economic Index, a measure of past performance, rose three-tenths of a percent to 118.1 in July. The index has increased 1.3 percent over the past three months.

For July, four of seven components of the index advanced, including consumer credit, commercial and industrial financing, inventories and labor costs. An increase in the duration of unemployment pulled down the index, as did a decline in the cost of services. The average prime rate charged by banks held steady.