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Economy in Brief

U.S. Leading Economic Indicators Rise
by Tom Moeller  August 18, 2016

The Conference Board's Composite Index of Leading Economic Indicators increased 0.4% during July (1.2% y/y) following an unrevised 0.3% June gain. It was the third rise in the last four months. Expectations had been for a 0.3% increase in the Action Economics Forecast Survey. The three-month change in the index eased slightly to 2.3% (AR), and was below its peak growth of 7.1% roughly one year ago.

Virtually all of the component series contributed positively to the total, including higher stock prices, a steeper interest rate yield curve, longer average weekly production sector hours-worked, lower initial claims for unemployment insurance and the leading credit index. Lower consumer expectations for business/economic conditions had a negative influence and building permits were neutral.

The coincident index increased 0.4% (1.6% y/y) following a 0.2% rise, revised from 0.3%. It was the strongest rise since December 2014. Three-month growth of 1.8% (AR) was the strongest since February. Each of the component series, including nonfarm payrolls, industrial production, personal income less transfers and manufacturing & trade sales contributed positively to the index.

The lagging index improved 0.1% (3.0% y/y) following an unrevised 0.1% fall. Three-month growth weakened further to 1.7% versus a 4.7% high two months ago. A higher consumer credit-to-income ratio and a higher inventory-to-sales ratio had the largest positive effects on the total index last month. Offsetting these gains were a longer duration of unemployment, fewer commercial & industrial loan outstanding, and lessened 6-month growth in the services CPI.

The ratio of coincident-to-lagging indicators also is a leading indicator of economic activity. It measures excesses in the economy relative to its ongoing performance. This ratio rose to the highest level in three months.

The Conference Board figures are available in Haver's BCI database; the components are available there, and most are also in USECON. The expectations are in the AS1REPNA database. Visit the Conference Board's site for coverage of leading indicator series from around the world.

Business Cycle Indicators (%) Jul Jun May Jul Y/Y 2015 2014 2013
Leading 0.4 0.3 -0.2 1.2 4.3 5.8 2.9
Coincident 0.4 0.2 -0.1 1.6 2.5 2.6 1.4
Lagging 0.1 -0.1 0.4 3.0 3.7 3.7 3.9
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