Steady Growth Expected For U.S. Economy

The Conference Board’s Leading Economic Index (LEI) for the U.S. continues its upward swing. Last month, it increased 0.3 percent to 128.3, following an uptick of 0.6 percent in June and 0.3 percent in May. Furthermore, in the six-month period ending July 2017, the leading economic index increased 2.3 percent, faster than the growth of 1.5 percent during the previous six months.

The Conference Board’s Coincident Economic Index (CEI), a measure of current economic activity, also increased in July, rising 0.3 percent to 115.7, following a 0.1 percent increase in June and a 0.3 percent increase in May. The Conference Board’s Lagging Economic Index, an indicator representing changes that come only after the economy has begun to follow a particular trend, ticked up 0.1 percent in July to 124.8, after increases of 0.2 percent in both June and May.

The Conference Board reports that the LEI has been on an upward trajectory for almost a year, and as a result, its six-month growth rate has improved compared to the end of last year. Meanwhile, the CEI continues to slowly improve and its pace of growth is now moderately faster than six months ago. Taken together, the recent behavior of the composite indicators and their components indicate that the expansion in economic activity will continue in the months ahead, with the possibility of some moderate upside potential for growth.

“The U.S. LEI improved in July, suggesting the U.S. economy may experience further improvements in economic activity in the second half of the year,” says Ataman Ozyildirim, director of business cycles and growth research at The Conference Board. “The large negative contribution from housing permits, a reversal from June, was more than offset by gains in the financial indicators, new orders and sentiment.”

Eight of the 10 indicators that make up the LEI for the U.S. also increased in July. The positive contributors—beginning with the largest positive indicator—were the interest rate spread, the Institute of Supply Management’s new orders index, average consumer expectations for business conditions, the Leading Credit Index (inverted), stock prices, average weekly initial claims for unemployment insurance (inverted), manufacturers’ new orders for consumer goods and materials, and manufacturers’ new orders for nondefense capital goods excluding aircraft. The negative contributor was building permits, while average weekly manufacturing hours were steady.

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