Leading Indicators Post First Drop in Over a Year

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The Conference Board has released its U.S. Leading Economic Index for September, showing a decline of 0.2%. Some of this disappointment is in the wake of two hurricanes. September’s reading was 128.6, and the move follows a 0.4% gain in August and a 0.3% gain in July.

Dow Jones (Wall Street Journal) and Reuters were both calling for a 0.1% gain in September. Bloomberg had a consensus for a 0.1% gain as well, with an EconoDay range of 0.0% up to 0.3%.

While much of the report is usually known, the reality is that you have to go back to August of 2016 to see a negative reading on the headline number for Leading Indicators, even though the Conference Board said right up front that the weakness was partly due to the impact of hurricanes.

The Conference Board showed that its coincidental indicators rose by 0.1% in September to 115.7, after a flat reading in August and a 0.1% gain in July.

The lagging indicators fell by 0.1% to 125.2 in September, following a 0.4% gain in August and a 0.1% gain in July.

Ataman Ozyildirim, Director of Business Cycles and Growth Research at the Conference Board, said:

The U.S. LEI declined slightly in September for the first time in the last twelve months, partly a result of the temporary impact of the recent hurricanes. 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 U.S. LEI remains consistent with continuing solid growth in the U.S. economy for the second half of the year.

While the “leading” part of the name sounds incredibly important, the reality is that the index is composed of 10 economic indicators. Most of that data is known ahead of this report, so it is assumed that the numbers are never that far off from expectations, even if there are occasional surprises. The “leading” aspect of this number is also not as leading as outsiders might expect due to the reading having almost a full one-month lag.