The Leading Economic Index rose 0.9 percent in July, marking the sixth-straight month of positive growth. Positive contributions this month were widespread, with seven of ten indicators boosting the headline.
Permits Build Up LEI in July
As economic conditions continue to improve, the Leading Economic Index (LEI) continues to string together positive reports. The LEI rose a strongerthan-expected 0.9 percent in July (top chart) with seven of ten components contributing to growth. In keeping with a well-established trend, the interest rate spread provided the largest boost at 0.27 percentage points, but building permits and average weekly claims were right behind at 0.24 percentage points each. This comes as housing starts and building permits, released earlier this week, both bounced back strongly in July following declines in June. The housing recovery has been on a bit of shaky ground since experiencing a rough start to the year, as housing market indicators have been back and forth in recent months. Despite recent volatility, we still expect the housing recovery to press on as builder sentiment remains strong—represented by the NAHB home builders’ sentiment index—which posted its fourth-straight monthly gain in August.
Labor Market Indicators Split
Average weekly claims was one of the strongest contributing components to July’s gain in the LEI. This comes as no surprise, as initial jobless claims reached its lowest level on a weekly basis in July, since 1999, bringing the four-week moving average to 303,000, the lowest since 2007. However, average weekly hours is responsible for the only notable drag, with a negative contribution of 0.13 percentage points (middle chart). Continued strong employment gains and falling jobless claims are consistent with a recovering labor market, while the weekly hours component shows that there is still room for improvement.
Other positive contributors this month include the ISM new orders component, leading credit index and a slight boost from stock prices and consumer goods, while consumer expectations and core capital goods were minor drags on the month. The strong contribution from the leading credit index is consistent with recent improvement in consumer credit, as consumers seem to be more comfortable borrowing again. Also encouraging is the jump in the ISM new orders component, pointing to solid growth in business activity.
Philly Fed Index Jumps Unexpectedly
Consistent with national and regional manufacturing PMIs, the Philly Fed index showed continued strength in August. The six-month forwardlooking figure of this survey marked the highest reading since 1992 at 66.4 (bottom chart). While some of the volatile underlying components were a bit less encouraging, the larger-than-expected jump in the headline to 28.0 is a strong positive. The prices-paid component fell in August, consistent with the cooling in inflation following the brief pickup. Overall, we see the August release of the Philly Fed index as another positive for a manufacturing sector that seems to be gathering steam.
Permits Build Up LEI in July
As economic conditions continue to improve, the Leading Economic Index (LEI) continues to string together positive reports. The LEI rose a strongerthan-expected 0.9 percent in July (top chart) with seven of ten components contributing to growth. In keeping with a well-established trend, the interest rate spread provided the largest boost at 0.27 percentage points, but building permits and average weekly claims were right behind at 0.24 percentage points each. This comes as housing starts and building permits, released earlier this week, both bounced back strongly in July following declines in June. The housing recovery has been on a bit of shaky ground since experiencing a rough start to the year, as housing market indicators have been back and forth in recent months. Despite recent volatility, we still expect the housing recovery to press on as builder sentiment remains strong—represented by the NAHB home builders’ sentiment index—which posted its fourth-straight monthly gain in August.
Labor Market Indicators Split
Average weekly claims was one of the strongest contributing components to July’s gain in the LEI. This comes as no surprise, as initial jobless claims reached its lowest level on a weekly basis in July, since 1999, bringing the four-week moving average to 303,000, the lowest since 2007. However, average weekly hours is responsible for the only notable drag, with a negative contribution of 0.13 percentage points (middle chart). Continued strong employment gains and falling jobless claims are consistent with a recovering labor market, while the weekly hours component shows that there is still room for improvement.
Other positive contributors this month include the ISM new orders component, leading credit index and a slight boost from stock prices and consumer goods, while consumer expectations and core capital goods were minor drags on the month. The strong contribution from the leading credit index is consistent with recent improvement in consumer credit, as consumers seem to be more comfortable borrowing again. Also encouraging is the jump in the ISM new orders component, pointing to solid growth in business activity.
Philly Fed Index Jumps Unexpectedly
Consistent with national and regional manufacturing PMIs, the Philly Fed index showed continued strength in August. The six-month forwardlooking figure of this survey marked the highest reading since 1992 at 66.4 (bottom chart). While some of the volatile underlying components were a bit less encouraging, the larger-than-expected jump in the headline to 28.0 is a strong positive. The prices-paid component fell in August, consistent with the cooling in inflation following the brief pickup. Overall, we see the August release of the Philly Fed index as another positive for a manufacturing sector that seems to be gathering steam.
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