Leading Index for Indiana
Updated monthly, the Leading Index for Indiana™ (LII) was developed for Hoosier businesses and governments to provide a signal for changes in the general direction of the Indiana economy. In contrast to The Conference Board’s Leading Economic Index and other national indexes, the LII focuses on key sectors that are important to the Indiana economy. Learn more about the index »
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Index for March 2014
The Leading Index for Indiana (LII) warmed ever so slightly, stopping last month’s huge slide.
Note: Hover over the lower graph and move the slider to change the time period displayed.
The LII didn’t regain any territory it lost in February, however, rising an indiscernible tenth of a percentage point in March to a reading of 101.1. The components of the index improved, but unconvincingly. Home builders, while not talked off the ledge—the HMI dropped a whopping 10 points last month—were at least talked out of jumping. The 1 point improvement in home builder sentiment did little to reverse last month’s plummet.
The Institute for Supply Management (ISM) index rose nearly two points in March, reclaiming more than a third of February’s drop. Moreover, economic activity in the manufacturing sector continues to expand, as it has for the last nine straight months. The overall economy has been growing for 57 consecutive months, say the nation's supply executives in the latest Manufacturing ISM Report on Business®.
Small business optimism continues its hibernation with the latest National Federation of Independent Business (NFIB) Index dropping 2.7 points to 91.4, a reading that historically has been associated with recessions and periods of subpar growth. As the NFIB explains it, uncertainty is a major cause of reluctance to spend and hire among small firms. Record low counts of small firms indicate that the current period is a good time to expand. More firms are reducing inventory than adding to it, even in a growing economy, and more firms expect a deteriorating economy than an improving one. In NFIB’s Problems and Priorities survey, uncertainty about the economy and government policy both rank in the top five most severe problems facing small business owners. You don’t bet your money on a future you cannot see clearly. (For those wanting the small business perspective on how lousy the economy is but how great the Washington policy foul-ups are—without any mention of Obamacare—visit the NFIB’s website at http://www.nfib.com/surveys/small-business-economic-trends/.)
Despite the frigid weather, car sales held up; although, they were not quite as good as last year. There were 1.2 million light-vehicle sales in February 2014—this marked an increase of 17.9 percent from January 2014 but a decline of 0.1 percent over last February. Barring a few brands, namely Fiat Chrysler’s Jeep brand, most automakers saw sales decline. The February 2014 seasonally adjusted annual rate (SAAR) for light-vehicle sales is 15.3 million. February 2014 YTD figures bring total light-vehicle sales to 2.2 million, down 1.5 percent from a year ago.
Drivers of Change
Builder confidence in the market for newly-built, single-family homes as measured by the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) rose 1 point to 47. By and large, the March HMI mirrors last month’s gloom. Builders continued to be affected by poor weather and difficulties in finding lots and labor. “A number of factors are raising builder concerns over meeting demand for the spring buying season,” said NAHB Chief Economist David Crowe. The index’s components were mixed: the component gauging current sales conditions rose 1 point to 52, the component measuring buyer traffic increased 2 points to 33, but the component gauging sales expectations in the next six months fell 1 point to 53.
- Economic activity in the manufacturing sector expanded in February for the ninth consecutive month, and the overall economy grew for the 57th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report on Business®. The New Orders Index registered 54.5 percent, an increase of 3.3 percentage points from January's reading of 51.2 percent. As in January, several comments from the panel mention adverse weather conditions as a factor impacting their businesses in February. Other comments reflect optimism in terms of demand and growth in the near term.
The auto component of the LII rose a smidge (0.2 percent) from last month.
After a brutal January, the transportation and logistics component of the LII, the Dow Jones Transportation Average, eked out a small gain of 0.8 percent in February.
- No bad news on the interest rate front. The interest rate spread was essentially unchanged. That said, the Federal Reserve monetary policy undercuts the interest rate spread component of the LII from being a useful indicator to forecast future economy activity, as has been mentioned many times before.
The historical series for the LII reflects regular monthly revisions in source data. Users that analyze historical trends in the LII are encouraged to update the entire data series to eliminate discontinuities in the data.
Source: Indiana Business Research Center, Indiana University Kelley School of Business