March Leading Indicators, Philly Fed, April UI Claims

 Indicators Still Positive for U.S. Economy

  • The Conference Board’s Leading Economic Index for March increased by 0.4 percent.
  • Initial Claims for Unemployment Insurance gained 10,000 for the week ending April 15, to hit 244,000.

The Conference Board’s Leading Economic Index increased by 0.4 percent in March, extending a string of moderate-to-strong monthly gains that began last December. The Leading Index incorporates 10 components that provide forward-looking insight into the U.S. economy. Eight out of the 10 components were positive in April. In order of the magnitude of their positive contribution, they were interest rate spread, ISM new orders, consumer expectations for business conditions, building permits, stock prices, a credit index, manufacturers’ new orders for nondefense capital goods ex-aircraft and manufacturers’ new orders for consumer goods. The two negative contributors for the month were weekly manufacturing hours and initial unemployment insurance claims. The string of positive reports for the LEI is good news for the U.S. economy and is consistent with our expectation that real GDP growth will pick up in 2017 after a tepid first quarter. Much depends on the ability of the Trump Administration to push its pro-growth agenda through Congress. Several LEI components are responsive to the political climate, including consumers’ expectations and stock prices. Stock prices slumped through the second half of March and through April, and that could weigh on the LEI next month. Related to the LEI are the Coincident Economic Index (CEI) and the Lagging Economic Index (LAG). The CEI registered a modest 0.2 percent gain in March, reflecting the slow first quarter, while LAG was unchanged for the month. It is considered to be a meaningful recessionary indicator when all three indexes go negative at the same time. We are very far away from that.

Initial claims for unemployment insurance increased by 10,000 for the week ending April 15, to hit 244,000, still a very low number. Continuing claims fell by 49,000 for the week ending April 8, dropping below the two million mark to hit 1,979,000, an exceptionally low number. The basket of solid labor market indicators suggests that the weaker-than-expected March payroll job gain of just 98,000 was more fluky than substantive.

The Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey’s current conditions index dipped to a still-positive 22.0, suggesting that manufacturing conditions in the mid-Atlantic area are still improving, but at a slower pace than last month.

Market Reaction: Equity markets opened with gains. The 10-Year Treasury bond yield is up to 2.24 percent. NYMEX crude oil is down to $50.28/barrel. Natural gas futures are down to $3.24/mmbtu.

For a PDF version of this Comerica Economic Alert click here: Leading_Indicators_04202017.

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