US Leading Economic Index improves in March
The US Leading Economic Index for March improved 0.8% to 100.9 after increasing 0.5% the month before and rising by 0.2% in January, according to The Conference Board.
Conference Board economist Ataman Ozyildirim said the US Leading Economic Index increased steeply again for the third successive month. “After a winter pause, the leading indicators are gaining momentum and economic growth is gaining traction.”
Improvements in the US economy were broad-based, Ozyildirim added. The interest rate spread and labor market indicators were the main drivers of the March increase, offsetting the negative impact from building permits.
Consumer outlook improving
More importantly, consumer outlook is looking much less negative now, Ozyildirim emphasized.
The March increase in US LEI (Leading Economic Index) suggests that for the rest of the spring and well into the summer GDP (gross domestic product) will grow much more rapidly, Ken Goldstein, who is also an economist at The Conference Board, explained.
“The economy is rebounding from widespread inclement weather and the strengthening in the labor market is beginning to have a positive impact on growth.”
“Overall, this is an optimistic report, but the focus will continue to be on whether improvements in the labor market can be sustained, fueling stronger economic performance over the next few months.”
The LEI includes the following components:
- Average consumer expectations for business conditions.
- Average weekly hours, manufacturing.
- Average weekly initial claims for unemployment insurance.
- Building permits, new private housing units.
- Interest rate spread, 10-year Treasury bonds less federal funds.
- ISM new orders index.
- Leading Credit Index.
- Manufacturers’ new orders, consumer goods and materials.
- Manufacturers’ new orders, non-defense capital goods excluding aircraft.
- Stock prices, 500 common stocks.
March’s LEI gain was driven by positive contributions in all the labor market and financial components. During the last six months ending in March 2014, the LEI rose 2.7% (5.6% annualized), which was lower than the 3.3% growth (6.6% annualized) during the previous six months.
(Source: The Conference Board)
US Coincident Economic Index up
The US CEI (Coincident Economic Index) rose 0.2% in March to 108.3, after increasing by 0.4% in February and falling 0.1% in January.
The CEI includes four components:
- Employees on agricultural payrolls
- Personal income less transfer payments
- Industrial production
- Manufacturing and trade sales
The CEI is a measure of current economic activity, it rose 0.9% (1.9% annualized) between September 2013 and March 2014, which was less than 1.1% (2.3% annualized) during the previous three months. However, all four components advanced over the last six months.
Lagging Economic Index up
The US LAG (Lagging Economic Index) increased by 0.6% in March to 123, after a 0.3% rise in February and a 0.6% improvement in January.
The LAG consists of seven components:
- Average duration of employment.
- Average prime rate. (The rate on loans for banks’ most creditworthy customers)
- Commercial and industrial loans.
- Consumer installment credit to personal income ratio.
- Consumer price index for services.
- Inventories to sales ratio, manufacturing and trade.
- Labor cost per unit of output, manufacturing.
In March, six of the seven LAG components advanced, with the average prime rate banks charged holding steady.
According to Deloitte, its US Consumer Spending Index declined half-a-point in March to 3.51 versus 4.03 in February. The report added that March’s index still indicates positive conditions for consumers.