Hurricanes’ Impact Pushes Down Economy’s Performance In September

The Conference Board’s Leading Economic Index (LEI) dipped in September, in part due to the impact of the recent hurricanes. The index declined 0.2 percent in September to 128.6 following increases of 0.4 percent and 0.3 percent in August and July, respectively.

“The US LEI declined slightly in September for the first time in the past 12 months, partly a result of the temporary impact of the recent hurricanes,” says Ataman Ozyildirim, director of business cycles and growth research at The Conference Board. “The source of weakness was concentrated in labor markets and residential construction, while the majority of the LEI components continued to contribute positively. Despite September’s decline, the trend in the US LEI remains consistent with continuing solid growth in the US economy for the second half of the year.”

The LEI is comprised of 10 components and is constructed to summarize and reveal common turning-point patterns in economic data in a clearer and more convincing manner than any individual component—primarily because they smooth out some of the volatility of individual components.

The 10 components of The Conference Board Leading Economic Index for the U.S. include: average weekly hours for manufacturing; average weekly initial claims for unemployment insurance; manufacturers’ new orders for consumer goods and materials; the ISM Index of New Orders; manufacturers’ new orders for nondefense capital goods excluding aircraft orders; building permits for new private housing units; stock prices of 500 common stocks; the Leading Credit Index; interest rate spread of 10-year Treasury bonds less federal funds; and average consumer expectations for business conditions.

The Conference Board’s Coincident Economic Index ticked up 0.1 percent in September, while its Lagging Economic Index declined 0.1 percent that month. The Conference Board uses the Leading, Coincident and Lagging Indexes to identify peaks and troughs in the business cycle. They are composite averages of several individual leading, coincident or lagging indicators.

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