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 »
Notice to Users: Regular production of the LII will be discontinued as of October 2014. Learn more »
|Change from Previous Month||0.3%|
Index for August 2014
The Leading Index for Indiana (LII) made up almost all of the ground it lost during the “Big Chill” of the first quarter of 2014 with a reading of 101.6—up from a revised July reading of 101.2.
Note: Hover over the lower graph and move the slider to change the time period displayed.
The index rose due to increases in the LII components for manufacturing, the auto sector and home building. The transportation component took a small dip.
The encouraging employment news helps to explain the boost in the home builders’ optimism because builders are seeing a noticeable increase in the number of serious buyers who are, in turn, more upbeat about their job prospects.
Auto sales remain encouraging with July 2014 sales at 16.4 million at a seasonally adjusted annual rate (SAAR).
As mentioned ad nauseam, the interest rate component of the LII has been made useless due to Federal Reserve policy. As also stated, although less frequently, the yield spreads that once foretold of changes in economic growth have proven to be less reliable. A new study by Wells Fargo Securities has documented that, post Great Recession, the relationship between the interest rate spread and GDP growth is questionable at best. While the interest rate spread is only one of five components of the LII, the tenuous relationship in this component would require a rethinking and reconfiguring of the design of the LII. As a result, the IBRC is announcing that the October LII, due October 21, will be the last regular LII release.
Drivers of Change
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August rose two points to 55. This is the third consecutive rise and brings the HMI to its highest level since January.
Based on the Institute of Supply Management’s Purchasing Manager’s Index (PMI), economic activity in the manufacturing sector expanded for the 14th consecutive month in July. The July PMI® registered 57.1 percent, an increase of 1.8 percentage points from June's reading of 55.3 percent.
The auto component of the LII—unfilled orders for automobile bodies and parts—also rose, by 0.7 percent.
The transportation and logistics component of the LII, the Dow Jones Transportation Average, took a breather in July, dipping 0.7 percent.
The interest rate spread was virtually unchanged.
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