Leading indicators fall 0.5% in October

NEW YORK – The index of U.S. Leading Economic Indicators fell sharply last month, led by a decline in building permits and a rise in layoffs, The Conference Board said in a report today.
The October index of 136.9 points (1996 = 100) was 0.5 percent below the revised September level. The decline followed a revised September gain of 0.1 percent and an August decline of 0.9 percent. Analysts had expected the index to fall 0.3 percent last month, based on the median estimate of 60 economists surveyed by Bloomberg News.
“The leading index has been essentially flat in 2007, continuing the yearlong pattern of alternating monthly increases and decreases, and it has gradually returned to its August 2006 level,” The Conference Board said in its report. Only three of the index’s 10 composite indicators improved in October: stock prices, the nation’s real money supply adjusted for inflation, and manufacturers’ new orders for consumer goods and materials.
The other seven all lost ground, led by a sharp decline in building permits, an increase in first-time claims for unemployment benefits, and a decline in the Reuters/University of Michigan Consumer Sentiment Index. Also falling were vendor performance, the average manufacturing work week, manufacturers’ new orders for non-defense capital goods and the interest-rate spread.
Over the six months from April to October, the board said, the index fell 0.5 percent “and the strengths among its components remained balanced with the weaknesses.
“Meanwhile, real GDP grew at a 3.9 percent annual rate in the third quarter, moderately stronger than the 2.2-percent average annual rate in the first half of the year. The behavior of the composite indexes so far continues to suggest that risks for economic weakness persist, but economic growth should continue in the near term, albeit at a slower pace.”
The board’s index of current economic activity was unchanged in October, after rising 0.2 percent in September. Its gauge of lagging indicators rose 0.3 percent, slowing from September’s 0.4-percent gain.
“There is a definite pattern of weakening here,” Edward McKelvey, a senior economist at Goldman Sachs Group Inc. in New York, told Bloomberg News. “It’s all consistent with deceleration in the economy and that includes some deceleration in the labor market.” Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, added: “Consumer spending is a bit hemmed by rising gasoline and falling home values.”
The Conference Board is a nonpartisan, nonprofit business membership and research organization with offices in New York City, Chicago and abroad. Additional information, including this month’s Leading Economic Indicators report, is available at www.Conference-Board.org.