November 2017 Leading Economic Indicators

America’s output is poised to continue advancing according to the latest data from the Conference Board’s Leading Economic Index (LEI). After a few months of volatility (mostly hurricane-related), this forward-looking indicator settled into a decent pace of growth, 0.4 percent in November 2017. A majority of the components were positive in the period.

Orders and expectations led the LEI higher, but financial markets helped lift the tally as well. Orders from the Institute for Supply Management contributed the most to the tally as firms across the economy anticipate an expanding economy in the near-term. Consumers believe business conditions are improving, adding the second largest contribution to this iteration of LEI. The interest rate spread between the overnight lending rate banks charge each other and the ten-year Treasury bond yield remains positive, and stock prices continued their uptrend, both adding to this forward-looking index. Despite the overall positive tone of the report, there were a few blemishes in the tally.

Three indicators were embellished with negative signs in November. After four consecutive months of growing capital outlays, firms purchased marginally less equipment in the penultimate period of 2017 than in October. Building permits also declined in the period. However, the biggest fly in the ointment came from initial claims for state unemployment insurance. This portion of the indicator has been rather erratic lately as it was influenced heavily by the impacts of two horrendous hurricanes, so this downtick could be an echo of these disasters. Overall, the weak components were only mildly feeble.

In sum, our economy should continue expanding in the months and quarters ahead. There are few signs of weakness in America’s output. This is not to say we cannot experience slowing growth, but there are no indications of a new recession on the horizon at this time.