U.S. Leading Economic Indicators Decline Further in July
by:Tom Moeller
|in:Economy in Brief
Summary
- Leading index drop is largest in three months.
- Coincident index stabilizes, following two months of increase.
- Lagging index dips for second month in last three.
The U.S. Leading Economic Index fell 0.6% (-5.2% y/y) during July following a 0.2% June decline and a 0.5% May drop, according to a report by the Conference Board. This marks the fifth consecutive negative reading. The index has been moving lower since a peak in December 2021. A 0.4% July shortfall had been expected in the Action Economics Forecast Survey.
Five of ten components contributed negatively to the overall index in July including the average workweek, the ISM new orders index, building permits, the spread between the 10-year Treasury and the Fed funds rate, as well as consumer expectations for business/economic conditions. Initial claims for unemployment insurance, factory orders for consumer goods, and nondefense capital goods orders had little or no effect on the leading index change, while stock prices and the leading credit index contributed positively.
The Coincident Economic Index held steady (+1.4% y/y) during July following a 0.2% June gain and a 0.4% May increase. Three of the four components made positive contributions to the coincident index in July, including changes in personal income less transfers, nonagricultural payroll employment and real manufacturing & trade sales. The change in industrial production had a negative effect on the coincident indicators last month.
The Lagging Economic Index slipped 0.1% last month (+1.7% y/y) after rising 0.2% in June and easing 0.1% in May. The average duration of unemployment, the manufacturing & trade inventory-to-sales ratio, and the ratio of consumer credit to income made minimal positive contributions while banks’ prime interest rate had no effect. The six-month change in unit labor costs, the six-month change in the services CPI, and commercial & industrial loans outstanding contributed negatively.
The ratio of the coincident index to the lagging index is also viewed as a leading indicator of economic activity. This measure edged up 0.1% in July, following no change in June and a 0.5% May increase.
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 website for coverage of leading indicator series from around the world.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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