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 November 2013
The Leading Index for Indiana (LII) registered a reading of 101.7 in November, unchanged from a revised October value.
Note: Hover over the lower graph and move the slider to change the time period displayed.
As with many months before, the movements of the LII components were mixed. Home builder sentiment, souring somewhat the last couple months, held steady. The auto sector component was marginally negative. The general manufacturing and transportation components were positive.
Perhaps the LII is holding its breath this month in anticipation that political and economic policy watchers—and by extension business owners and securities markets—will hold their collective breaths in early 2014. In less than 3 months, Washington will have to act on the debt ceiling, federal shutdowns, and the federal budget and that may give businesses and consumers cause to pause. It is a forecasting cop-out to say “time will tell.”
Nevertheless, the next few months are anybody’s guess given that the antics in Washington earlier this fall had a trifling economic impact (and the stock market just keeps rising!), but on the other hand consumer misgivings about a murky future may well dim the brightness on the Christmas spending season. But then again, the continuing handwringing over Obamacare, the business uncertainty the ACA rollout has generated, added to the complete evaporation of confidence in Washington by the average citizen makes and it look as if the economic road will be rough in early 2014. Time will well.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment this month continued its swoon, falling from a 75.2 to 72.0. Analysts had expected the index to rebound in November. This reading is near a two-year low as lower-income households worried about their job prospects and financial outlooks. Negative views of the government continue to linger. Lower-income households in particular worried about their future financial state, according to the survey. That was a contrast to richer households - those with incomes above $75,000 - which seemed more optimistic as stock prices increases boosted net wealth gains.
Today’s economic and forecasting conundrum: how can the financial markets be doing so well—a 25 percent rise in the S&P 500 over the last year!—while the economy, by most measures, stinks royally. The gap between Wall Street and Main Street widens. Small business—a.k.a. Main Street—optimism dropped from 93.9 to 91.6 according to National Federation of Independent Business. The political stalemate in early October over funding the government as well as the failed “launch” of the Obamacare website left 68 percent of business owners feeling that the current period is a bad time to expand. NFIB chief economist Bill Dunkelberg commented that “small employers are not fooled by headlines announcing record high stock market indices; everyday they live the economic realities of overregulation, increased taxes, weak sales and a government without any direction or plan for the future.” The new budget deadline of January 15, 2014 is approaching quickly and Congress appears to be solely focused on the train wreck of a healthcare law. There are only two chances that anything else productive gets done in Washington over the next few months: fat and slim.
Drivers of Change
Home builder confidence was unchanged in September, reflecting continued political uncertainty in Washington and concern about mortgage rates, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The fact that builder confidence remains above 50 is encouraging, especially if one considers the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline.
The Institute for Supply Managementís Purchasing Managers Index (PMI) moved up from 56.2 to 56.4 Comments from the survey participants were generally positive and optimistic. This monthís PMI indicates growth for the 53rd consecutive month in the overall economy and indicates expansion in the manufacturing sector for the fifth consecutive month.
The Institute for Supply Managementís Purchasing Managers Index (PMI) moved up a half point, from 55.7 to 56.2. Comments from the survey participants were generally positive and optimistic about increasing demand and improving business conditions.
After hitting an important sales marker in Augustó16 million units on a Seasonally Adjusted Annual Rate (SAAR)óU.S. automobile sales slipped a bit in September and October to 15.2 million units (in both months, SAAR). There were 1.2 million light-vehicle sales, in the U.S., in October 2013. This marked an increase of 6.0 percent from September 2013 and an increase of 10.5 percent over October 2012. The October 2013 YTD figures bring total light-vehicle sales to 12.9 million, up 8.3 percent from a year ago. The value of unfilled orders for auto bodies and parts decreased a half percentage point.
The Dow Jones Transportation Average, the transportation and logistics component of the LII, rose again, this time almost six percent over the course of the month.
The yield on 10-year U.S. Treasuries edged up and closed September over one hundred basis points higher than April. Keep in mind that if the 10 year treasury climbs too high or too quickly, it could shatter the fragile housing recovery.
- The yield on 10-year U.S. Treasuries fell about 20 basis points in October. Good news for the fragile housing recovery and evidence that quantitative easing (QE) is alive and well. Many analysts think that Janet Yellen, President Obamaís nominee for Fed chair, will be even more dovish than the current Fed chair, maintaining Fedís policy of asset purchases to expand the money supply, QE, well into the foreseeable future. As one noted several months ago, any hint or whisper that QE may be ramped down makes financial markets nervous.
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