The Conference Board Leading Economic Index for the U.S. increased 0.2 percent in October. This follows a 0.9 percent increase in September and a 0.7 percent increase in August. The Coincident Economic Index increased 0.2 percent, and the Lagging Economic Index increased 0.3 percent.
"The modest rise in the Leading Economic Index in October follows the strong advances recorded in the prior two months, which helps lift the six-month annualized growth rate to 5.1 percent from 3.7 percent in the previous six months," said Kathy Bostjancic, director of macroeconomic analysis at The Conference Board. "The recent increase in the index supports our forecast that the U.S. economy is poised to grow somewhat faster at 2.3 in 2014 compared to 1.6 percent in 2013. Within the details, the sub-indexes contributing positively to growth are the financial, housing and manufacturing variables. Restraining growth is the ongoing caution of businesses that continue to keep tight reins on capital expenditures."
The LEI now stands at 97.5 (2004=100). Positive contributions from the financial indicators, building permits and ISM new orders more than offset large negative contributions from weekly initial claims for unemployment insurance and consumer expectations for business conditions. In the six-month period ending October 2013, the leading economic index increased 2.5 percent (about a 5.1 percent annual rate), faster than the growth of 1.8 percent (about a 3.7 percent annual rate) during the previous six months.
The CEI for the U.S., a measure of current economic activity, increased to 106.9 (2004=100) in October. The index rose 1.1 percent (about a 2.3 percent annual rate) between April and October 2013, slightly slower than the growth of 1.4 percent (about a 2.9 percent annual rate) for the previous six months. However, the strengths among the coincident indicators have remained widespread, with all components advancing over the past six months.
The lagging economic index continued to increase but at a higher rate than the CEI, now standing at 119.7 (2004=100). As a result, the coincident-to-lagging ratio is down slightly. Real GDP expanded at a 2.8 percent annual rate in the third quarter of the year, after increasing 2.5 percent (annual rate) in the second quarter.
"The US LEI has increased for four consecutive months," said Ken Goldstein, economist for The Conference Board. "Overall, the data reflect strengthening conditions in the underlying economy. However, headwinds still persist from the labor market, accompanied by business caution and concern about federal budget battles. The biggest challenge to date has been relatively weak consumer demand, which continues to be restrained by weak wage growth and slumping confidence."