Haver Resources
Oct 21

U.S. Leading Economic Index Extends Decline into September

Summary
  • Component movement in leading index remains mixed.
  • Coincident indicators edge higher.
  • Lagging indicators weaken further.

The Conference Board’s Leading Economic Index fell 0.5% (-4.8% y/y) during September following a 0.3% decline during August, revised from -0.2%. A 0.3% decline in the September index had been expected in the Action Economics Forecast Survey. The index has been declining since a peak in December 2021. It is comprised of 10 components which tend to precede changes in overall economic activity.

Putting negative pressure on the Leading Index last month were a decline in ISM new orders, fewer building permits, the interest rate yield curve and weaker consumer expectations for business/economic conditions. Component increases in the Leading Indicators index included fewer unemployment insurance claims, factory orders for consumer goods, nondefense capital goods orders, the S&P 500 stock price index and the leading credit index. The length of the average workweek held steady.

The Coincident Economic Index improved 0.1% (1.4% y/y) during September after rising 0.2% in August, revised from 0.3%. Three of the four component series contributed positively to the September gain including nonfarm payroll employment, real personal income less transfers and real manufacturing & trade sales. Contributing negatively to the coincident index change, for the second month in the last three, was the change in industrial production.

The Lagging Economic Index suggested a growing amount of economic slack by declining 0.3% in September (+0.9% y/y) after holding steady (unrevised) in August. It was the second decline in the last three months. A longer duration of unemployment, the 6-month change in unit labor costs, the prime rate charged by banks, the level of C&I loans and the 6-month change in the services CPI contributed negatively to the index change. The inventory-to-sales ratio and the consumer installment credit/income ratio contributed positively to the lagging index change.

The ratio of the Coincident-to-Lagging indicators, considered another leading economic indicator, rose last month to the highest level since May 2022.

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.

About The Author

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Thomas J. Moeller

Haver Analytics is pleased to bring Thomas J. Moeller’s commentaries on the state of the U.S. economy to its clients.

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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