Rebounding leading index signals continued growth

Ataman Ozyildirim

A monthly index forecasting economic conditions has rebounded — signaling continued growth in the months ahead, but at a slower pace.

The Conference Board reported its Leading Economic Index (LEI), rose a half of a percentage point to 112.2 in July. The gain follows a tenth of a percent decline in both June and May.

Separate measures of current and past economic performance both increased in July.

“While the LEI suggests the U.S. economy will continue to expand in the second half of 2019, it is likely to do so at a moderate pace,” said Ataman Ozyildirm, senior director of economic research at the Conference Board.

The LEI has increased eight-tenths of a percent over the past six months in matching growth over the previous six-month span. Strength among the leading indicators remains more widespread than weaknesses.

Gross domestic product, the broad measure of goods and services produced in the country, increased at an annual rate of 2.1 percent in the second quarter after growing 3.1 percent in the first quarter.

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

The Coincident Economic Index, a measure of current performance, rose two-tenths of a percent to 106.2. The index has increased six-tenths of a percent over the past six months.

For July, three of four indicators advanced: nonfarm payrolls, personal income and sales. Industrial production retreated.

The Lagging Economic Index, a measure of past performance, rose six-tenth of a percent to 108.5. The index has increased 1.2 percent over the past three months.

For July, four of seven indicators advanced, including commercial and industrial financing, cost of services and personal credit. A decrease in the duration of unemployment also bolstered the index. Labor costs retreated. The average prime rate charged by banks and inventories held steady.