The Conference Board reported that its Leading Economic Index rose 0.7 percent in February, extending its growth to five consecutive months. February’s expansion was above the 0.2 percent growth experienced in January, which was revised lower from 0.4 percent. The largest drivers of February’s increase were declines in unemployment claims, increases in building permits and stock prices and improving credit conditions. On the other hand, consumer expectations pulled the index somewhat lower.
Manufacturing also had a positive impact on the index overall, but its components were mixed. Helping to lift the index were contributions from a longer average workweek and increased new orders for both consumer goods and materials and nondefense capital goods, excluding aircraft. The Institute for Supply Management’s new order index, which is one of the components of this index, fell last month, and as such, it provided a slight drag.
Looking at the Coincident Economic Index, which measures the current environment, it increased by 0.2 percent, similar to the prior month. Its biggest lift came from manufacturing and trade sales, with nonfarm employment and personal income also positive contributors. Industrial production provided essentially no contribution, as it was flat in February (although up for the manufacturing sector).
Overall, this report provides continuing encouragement of moderate growth in the coming months. Manufacturing is playing a large role in this, but improvements in labor and housing markets are also a plus. With that said, businesses remain cautious optimistic about future activity, especially given the number of headwinds that continue to persist.
Chad Moutray is chief economist, National Association of Manufacturers.