August 2018 Leading Economic Index
Submitted by Atlas Indicators Investment Advisors on October 1st, 2018No economic storms can be seen from here to the horizon according to the Conference Board’s Leading Economic Index (LEI). This ten-component index theoretically looks out into the future by some six to nine months, aggregating indicators that tend to lead economic output. Its most recent iteration, released in September for August 2018, increased 0.4 percent after rising 0.7 percent in July; this suggested more growth is still in store for America’s economy.
The LEI’s positive trend was well supported in the period as seven of the ten components were higher. Data from the Institute for Supply Management and various financial indicators were positive. Generally speaking, new orders continued growing. Stock prices contributed to the uptick as did the yield curve which, despite tightening actions by the Federal Reserve, remained positive; it’s worth noting that this component’s contribution has been slowing for months. The Conference Board’s proprietary Leading Credit Index has been on an improving trend this year and continued the pattern in August. Consumer expectations for business conditions managed a minor uptick in the period as well.
It wasn’t all good news though. There was some monthly weakness in three indicators. Building permits took the largest hit. The average workweek for production workers declined marginally. Likewise, capital goods orders decline despite the overall increase in new orders mentioned earlier.
This group of forward-looking indicators continues appearing constructive. This resonates with the Federal Reserve’s expectations that Atlas mentioned in Friday’s note. There appears to be little in the way of forecastable problems in America’s economy as it moves forward at a reasonable pace.