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Economy in Brief

U.S. Leading Economic Indicators Signal Continued Expansion
by Tom Moeller  April 19, 2018

The Conference Board's Composite Index of Leading Economic Indicators increased 0.3% during March following a 0.7% February gain, revised from 0.6%. The y/y change strengthened to 6.2% from 4.1% during all of last year. The latest increase matched expectations in the Action Economics Forecast Survey.

Movement amongst the component series was mixed last month. Positive contributions to the leading index were made by the ISM new orders index, building permits, the interest rate spread between 10-Year Treasuries & Fed funds, consumer expectations for business/economic conditions, the leading credit index and new orders for consumer goods. Contributing negatively to the index change were the average workweek, initial unemployment insurance claims and new orders for nondefense capital goods. Stock prices were unchanged m/m. Three-month growth in the leading index eased to 7.7% (AR) from its 9.9% December peak.

The Index of Coincident Economic Indicators increased 0.2% (2.3% y/y) during March after a 0.4% February rise, revised from 0.3%. Each of the component series contributed positively to the total's rise including personal income less transfer payments, business sales, payroll employment and industrial production. Three-month growth in the index of 2.0% (AR) was reduced from 3.6% as of December.

The Index of Lagging Economic Indicators ticked 0.1% higher last month (2.6% y/y) following a 0.3% February gain, revised from 0.4%. The change in business inventories, the average prime rate charged by banks, the consumer credit/personal income ratio, C&I loans outstanding and growth in the services CPI had positive effects on the index. The average duration of unemployment had a sharply negative effect on the lagging index and unit labor costs had no effect on the index change. Three-month growth in the lagging index fell sharply to 2.7%, its weakest since November.

The ratio of coincident-to-lagging indicators is often considered to be a leading indicator of economic activity. As economic slack diminishes relative to current performance, the ratio will rise. It held steady last month at a low 98.9.

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.

Safeguarding Financial Resilience through the Cycle from Fed Governor Lael Brainard is available here.

Business Cycle Indicators (%) Mar Feb Jan Mar Y/Y 2017 2016 2015
Leading 0.3 0.7 0.8 6.2 4.1 1.2 4.2
Coincident 0.2 0.4 -0.1 2.3 1.8 1.3 2.2
Lagging 0.1 0.3 0.3 2.6 2.6 2.9 3.7
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