Leading index slips, signals slow growth ahead

Ataman Ozyildirim

A monthly index forecasting economic conditions continues to decline, but also signal growth.

The Conference Board reported its Leading Economic Indicator (LEI) slipped a tenth of a percent to 111.9 in September. A separate measure of current conditions held steady, while a measure of past conditions increased.

“The LEI reflects uncertainty in the outlook and falling business expectations brought on by the downturn in the industrial sector and trade disputes. Looking ahead, the LEI is consistent with an economy that is still growing, albeit more slowly, through the end of the year and into 2020,” said Ataman Ozyildirim, senior director of economic research at the Conference
a business research and membership association.

The LEI has increased two-tenths of a percent over the past six months, about the same pace as the previous six-month span. Strengths among the indicators remain more widespread than weaknesses.

Gross domestic product, the broad measure of goods and services produced in the country, grew at an annual rate of 2 percent in the second quarter after increasing 3.1 percent in the first quarter.

For September, five of 10 indicators of the LEI advanced, including a leading credit index, new orders for consumer and capital goods and stock prices. A decrease in initial claims for unemployment insurance also bolstered the index. Building permits, retreated, as did consumer expectations, the interest rate spread and a new orders index. Average manufacturing hours held steady.

The Coincident Economic Index, a measure of current performance, remained unchanged at 106.4. The index has increased six-tenths of a percent over the past six months.

For September, 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 108.3. The index has four-tenths of a percent over the past three months.

For September, three of seven indicators of the index advanced, including inventories 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 and the cost of labor. The cost of services held steady.