Submitted by Atlas Indicators Investment Advisors on April 27th, 2018
Economic output looks poised to continue higher according to data from the Conference Board. Their Leading Economic Index sustained its upward direction in March 2018. However, the monthly uptick decelerated for a second consecutive period, slowing to an increase of 0.3 percent after rising 0.7 percent and 0.8 percent in February and January respectively. Despite the monthly slowdown, the six-month growth rate increased compared to the previous six-month period.
Labor-related indicators became March’s fly in the ointment. The average workweek for production workers declined six minutes to 42.2 hours. Additionally, average weekly initial claims for state unemployment insurance increased 3,600 to 228,500; while seeing an increase in such benefits is not desirable, this is still a relatively low level. Only one other component of the LEI was negative for the month as businesses invested marginally less than in February.
Of the remaining seven components, six were positive, and one (stock prices) remained virtually unchanged. A positive yield curve (the difference between 10-year Treasury bonds and the overnight Federal Funds Rate) generated the greatest impact. New orders from the Institute for Supply Management provided the next largest lift. Consumers’ expectations for business conditions remained constructive. An increase in building permits also helped the tally. Finally, the Conference Board’s Leading Credit Index and manufacturers’ new orders of consumer goods and materials added marginally to the total.
America’s output continues growing. From the vantage point of LEI, there is no recession on the horizon. When an economic storm begins developing, this indicator should help identify the need to take shelter a few months ahead. For now, the sky is clear, suggesting our economy will grow over the next three to nine-month time horizon.
