Leading Economic Index

The Conference Board's Leading Economic Index increased 0.2% in May after increasing 0.4% in the prior month.  Seven of the ten indicators in the index were higher month over month.  Positive contributions came from new orders (for both consumer goods and materials and nondefense capital goods), the interest rate spread, stock prices and consumer expectations for business conditions.   Negative contributions came from building permits and working hours in manufacturing.  The index points to continued steady economic growth.   

Philadelphia Fed

The Federal Reserve Bank of Philadelphia report on the regions Manufacturing Business Outlook Survey indicted continued growth in the regions manufacturing sector.  For June, the index reading was 19.9, a number above 0.0 indicates expansion, down from 34.4 in May.  The drop was led by a pullback in the New Orders Index and the Unfilled Orders Index.  The decline in unfilled orders may be attributed to firms dwindling down their backlogs. 

• The Prices Received Index fell from 36.4 to 33.2
• The Prices Paid Index declined from 52.6 to 51.8
• The Average Employee Workweek fell from 34.4 to 24.2  
• The Number of Employees Index rose from 30.2 to 30.4

According to the report, “Price increases for purchased inputs were reported by 54 percent of the manufacturers this month, but the prices paid diffusion index edged 1 point lower. The current prices received index, reflecting the manufacturers’ own prices, decreased 3 points but remains at a high reading of 33.2. Nearly 34 percent of the firms reported higher prices for their manufactured goods.”

Looking forward six-months from now, the General Business Index dipped from 38.7 to 34.8.  Close to 48% of firms surveyed expect a pickup in manufacturing activity over the next six months, while 13% expect a decline.  The Prices Paid index declined and the Prices Received Index rose.  Indicating respondents expect input pricing pressures to subside while they expect to continue gradually raising prices on finished goods, which should help improve margins. 

Initial and Continuous Claims for the week ended June 16:

• Initial claims decreased by 3,000 to 218,000 
• The four-week moving average for initial claims decreased by 4,000 to 221,000
• Continuing claims increased by 22,000 to 1.723 million
• The four-week moving average for continuing claims decreased by 4,750 to 1,722,500; the lowest level since December 1973

Employment remains strong, and the four-week moving average for both initial and continuous claims declined.

Equity markets continue to bide time as they attempt to sort out unanswered questions.

• What will OPEC do at its meeting in Vienna?
• How will the strengthening U.S. dollar play out?
• How high will the Fed going in raising rates?
• How much, if any, of an effect will trade tariffs have?

The list goes on and on, and once we start to put check marks next to some of the unknowns, it should help improve market confidence.  Markets have held up reasonably well given the uncertainties mentioned above.