The 2020 Mid-Year Economic Update_long

Economic Indicators Point to Growth in Near Future

The Conference Board’s Index of Leading Economic Indicators increased 0.1 percent in December, indicating uneven growth in the next year. The Conference Board reported gains of 0.9 percent in November and 1 percent in October.


The Wall Street Journal reported that Conference Board Chairman Ken Goldsten said the indexes, taken together, imply a “quite choppy pattern of growth,” and indicate a surge in the economy over the next few months that might be followed by slower activity later in 2006.


The coincident index, a measure of current economic activity, increased in December. It has been on a steady upward trend since April 2003, but its growth has been moderated since June 2005.


Six of the 10 indicators that make up the leading index increased in December. The positive contributors were consumer expectations, real money supply, stock prices, average weekly initial claims for unemployment insurance, interest rate spread and manufacturers’ new orders for consumer goods and materials. The negative contributors were vendor performance, manufacturers’ new orders for non-defense capital goods, building permits, and average weekly manufacturing hours.


Three of the four indicators that make up the coincident index increased in December. Those are: industrial production, employees on nonagricultural payrolls, and manufacturing and trade sales. Personal income less transfer payments held steady in December.


A separate survey of the National Association for Business Economics also indicates growth. More than 60 percent of respondents expect real GDP to grow at an annual rate of 3 percent or higher in the first half of 2006. Industry demand has increased, profit margins are improving, capital spending rose and is expected to continue to grow. Employment growth remains healthy, and hiring plans have rebounded. Pressures on materials costs have lessened, while pressures on labor moved higher.


The survey reports that companies have been raising prices and are planning to raise prices in the near future. In response to questions regarding the effect of hurricanes this year, a majority of NABE respondents reported negligible effects.

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