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Economy in Brief

U.S. Leading Economic Indicators Strengthen
by Tom Moeller  September 21, 2017

The Conference Board's Composite Index of Leading Economic Indicators increased 0.4% (4.4% y/y) in August following an unrevised 0.3% July gain. A 0.2% rise had been expected in the Action Economics Forecast Survey. Three-month growth remained firm at 5.5% (AR).

Performance amongst the components of the leading indicator series was mostly positive. Building permits, a steeper interest rate yield curve, consumer expectations for business/economic condition, the ISM new orders and the average workweek series each contributed positively to the overall index rise. Stock prices and factory orders for both consumer and capital goods had neutral effects. Initial claims for unemployment insurance had a negative effect on the index.

The Index of Coincident Economic Indicators held steady m/m, up 1.9% y/y, following a 0.3% rise. Gains in payroll employment, personal income less transfer payments and business sales were countered by a decline in industrial production. Three-month growth in the index slowed to 1.4% (AR), its weakest since March.

The Index of Lagging Economic Indicators rose 0.3% (2.5% y/y) following three months of 0.2% gain. Commercial & industrial loans outstanding, the consumer credit-to-personal income ratio, the ratio of business inventories-to-sales and the average duration of unemployment each contributed positively to the index change. Growth in labor costs contributed negatively, but banks' prime lending rate and the change in the services CPI had neutral effects. Three-month growth of 2.6% in the index was fairly steady.

The ratio of coincident to lagging indicators is often considered to be a leading indicator of economic activity. If economic growth is slowing, both sets of indicators will be rising, but the gains in the coincident index will be slower than the lagging; thus, the ratio will fall. This ratio declined during August to a record low.

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 (%) Aug Jul Jun Aug Y/Y 2016 2015 2014
Leading 0.4 0.3 0.6 4.4 1.2 4.4 5.6
Coincident 0.0 0.3 0.1 1.9 1.6 2.3 2.5
Lagging 0.3 0.2 0.2 2.5 3.4 3.7 3.6
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