The Conference Board said that its Leading Economic Index rose 0.6 percent in April. The largest component of the increase stemmed from the jump in housing permits for the month, which exceeded the 1 million mark for the first time since June 2008. This factor alone added 0.4 percentage points to the Leading Economic Index. The other major factor helping to push this forward-looking measure higher were measures of credit, including the interest rate spread and the Conference Board’s index of credit conditions.
At the same time, the Leading index also highlighted some of the current weaknesses in the economy, particularly for manufacturers. Measures for new orders and the average workweek of production workers were net drags on the index. Indeed, manufacturing employment has been quite sluggish of late, with hiring unchanged in April. In addition, while consumer confidence did improve in April, it remains sub-par, lowering the index somewhat.
Meanwhile, the Coincident Economic Index – which measures the current climate – increased 0.1 percent in April. The higher figure resulted from stronger growth in nonfarm payrolls and personal income, with modest growth in new manufacturing sales. These increases, though, were mitigated by the 0.5 percent decline in industrial production in the month. As such, softness in the manufacturing sector has dampened the U.S. economy, something we continue to see in a number of economic indicators lately.
Chad Moutray is chief economist, National Association of Manufacturers.