Economic Watch: Leading Indicators, Manufacturing Ease
A measure of where the American economy is headed in the next three to six months shows conditions are improving, but not as fast as they have been, according to the private research group The Conference Board.
A measure of where the American economy is headed in the next three to six months shows conditions are improving, but not as fast as they have been, according to the private research group The Conference Board.
Its Leading Economic Index for the U.S. increased 0.8% in September to 104.4, following no change in August (which was downwardly revised from an originally reported 0.2% gain), and a 1.1% increase in July.
“The LEI picked up in September, after no change in August, and the strengths among its components have been very widespread over the past six months,” said Ataman Ozyildirim, economist at The Conference Board. “The outlook for improving employment and further income growth are expected to support the moderate expansion in the U.S. economy for the remainder of the year.”
Ten different measurements of the economy are used to make up the index.
“The financial markets are reflecting turmoil and unease, but the data on the leading indicators continue to suggest moderate growth in the short-term,” said Ken Goldstein, economist at The Conference Board. “Meanwhile, the weak advances in the housing market remain a bigger risk to the outlook than short-term financial gyrations.”
A separate measure of the economy shows U.S. manufacturing has slowed this month, hitting a three-month low, according to financial information services information provider Markit.
Its Flash U.S. Manufacturing Purchasing Managers’ Index indicated a slower improvement in overall business conditions across the manufacturing sector, registering 56.2, compared to 57.5 in September. Although still comfortably above the neutral level of 50, the index is notably weaker than the average seen during the third quarter as a whole at 57.1.
Softer new business growth was the main negative influence on the headline PMI in October, said Markit, as the latest rise in new orders was much weaker than in September and the slowest for nine months. Manufacturing output growth also slowed in October, while the latest increase in production volumes was the weakest since March. The rate of output growth has now moderated for two months in a row, the first back-to-back slowdown since May 2013.
“The data will no doubt add to the view that policymakers should be in no rush to raise interest rates, with output and order book growth slowing and price pressures easing. On the other hand, sustained strong job creation will raise worries that slack continues to be eroded, which could drive up inflation in the medium term,” said Chris Williamson, chief economist at Markit.
“Although output growth slowed to the weakest since March, the pace of expansion remains robust. Even expanding at this slower rate, the goods producing sector should help drive another solid upturn of the economy in the final quarter of the year.”
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