The Conference Board reported that its Leading Economic Index rose 0.2 percent in October, building on the 0.5 percent gain in September. The primary drivers of the increase, though, were credit and interest rates. The other positive contribution to the index came from improvements in initial weekly unemployment claims. Manufacturing provided an essentially neutral contribution, with stalled production, new orders and employment yielding a cumulative contribution of -0.01. Other negative contributors to the index were reduced building permits, lessened consumer confidence, and a slightly lower stock market.
Meanwhile, the Coincident Economic Index – which measures the current climate – increased 0.1 percent. The largest driver of the higher figure was strengthened manufacturing and trade sales, with higher nonfarm payrolls and personal income also making positive contributions. Industrial production, which declined 1.4 percent in October, was the lone negative contributor to the Coincident Index.
Overall, these numbers reflect an economy that is growing modestly, but still showing persistent weaknesses. Manufacturing activity, in particular, remains soft, with headwinds from slowing global sales and anxieties about the resolution of the fiscal cliff having an impact. If policymakers were able to avert the cliff, that would lift at least one of the uncertainties that are hampering growth in the sector.
Chad Moutray is the chief economist, National Association of Manufacturers.