San Diego Leading Economic Indicators, Sept 2014

Leading Economic Indicators Up in September

Note: The tentative release date of next month’s report is December 2.

October 31, 2014 — The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County rose 0.6 percent in September. Leading the move to the upside were sharp gains in initial claims for unemployment insurance and the outlook for the national economy.  Local stock prices, consumer confidence, and help wanted advertising were also up moderately.  The only negative was a sharp drop in building permits.

September’s gain was the fourth in a row for the USD Index and was the largest monthly gain since February 2013. The forecast remains for strong growth in the local economy, which is poised to add another 30,000 jobs in 2015.  That would be the fourth straight year with job gains exceeding that level.  One thing that will give a boost to the local economy in the short term is the recent plunge in the price of gasoline.  Gas prices have fallen more than 30 cents in the last month and are at their lowest levels since 2011.  That increases the purchasing power of gas consumers; my estimate is that each one cent decrease in the price of gas means an extra $1 million dollars a month in the hands of gasoline consumers, who could spend the money in restaurants, retail establishments, etc., instead of on gas.  Other benefits of lower gas prices include lower prices for products shipped into the county (due to a decrease in transportation costs) and a boost in consumer confidence.

Index of Leading Economic Indicators   The index for San Diego County that includes the components listed below (September)Source: USD Burnham-Moores Center for Real Estate +0.6%
Building Permits   Residential units authorized by building permits in San Diego County (September)Source: California Homebuilding Foundation -1.09%
Unemployment Insurance   Initial claims for unemployment insurance in San Diego County, inverted (September)Source: Employment Development Department +1.57%
Stock Prices   San Diego Stock Exchange Index (September)Source: San Diego Daily Transcript +0.32%
Consumer Confidence   An index of consumer confidence in San Diego County, estimated (September)Source: The Conference Board +0.73%
Help Wanted Advertising   An index of online help wanted advertising in San Diego (September)Source: The Conference Board +0.53%
National Economy   Index of Leading Economic Indicators (September)Source: The Conference Board +1.52%

School of Business Administration, 5998 Alcalá Park, San Diego, California 92110-2492, 619/260-2256

Highlights: Despite the recent downward trend, residential units authorized by building permits are actually up for the year. The USD Index looks at the month-to-month change in residential units, which are down from the big numbers at the beginning of the year.  Total units authorized were up 7.4 percent through the end of the third quarter compared to the same period in 2013, with single-family units up slightly and multi-family units up over 10 percent. . . Both labor market variables continue to do well.  Initial claims for unemployment insurance were down sharply again, matching the national trend which has seen initial claims drop and stay below the important 300,000 level. On the other side of the labor market, help wanted advertising turned in a second consecutive gain after having previously fallen for five months in a row. The net result was that the seasonally adjusted local unemployment rate remained a little under 6.0 percent in September, the same as in August and down from 7.4 percent in September 2013. . . Consumer confidence continues to surge, advancing for the eighth month in a row.  It should get a further boost with the decline in gasoline prices, which has been found to have a big impact on consumer confidence. . . Local stock prices rebounded in September after two down months.  The Index uses the average close for all trading days in a month as the measure of stock prices.  Local stocks finished the month lower than where they started, but the average for September was higher than the average for August. . .  The national Index of Leading Economic Indicators registered another strong gain, the sixth large gain in the last eight months and a signal of strength in the national economy.  After a strong second quarter gain of 4.6 percent, the advance estimate of third quarter GDP growth showed a higher than expected annualized growth rate of 3.5 percent.

September’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 129.1, up from August’s revised reading of 128.4. A downward revision in the national Index of Leading Economic Indicators reduced the previously reported change from +0.2 percent to +0.3 percent.  For revisions to the previously reported values for the Index and for the individual components, please visit the Website address given below.  The values for the USD Index for the last year are given below:

Index                           % Change

2013   

SEP     127.6                      +0.4

OCT    127.0                       -0.5

NOV    127.5                      +0.4

DEC    127.5                       +0.0

2014   

JAN     127.6                      +0.1

FEB     127.9                      +0.2

MAR    128.6                     +0.5

APR    127.9                       -0.5

MAY    127.5                      -0.3

JUN     127.7                     +0.2

JUL     128.1                     +0.3

AUG    128.4                    +0.2

SEP     129.1                 +0.6

For more information on the University of San Diego’s Index of Leading Economic Indicators, please contact:

Professor Alan Gin                           TEL:  (858) 603-3873

School of Business Administration     FAX:  (858) 260-4891

University of San Diego                         E-mail: agin@sandiego.edu

5998 Alcalá Park                                    Website: http://www.sandiego.edu/~agin/usdlei

San Diego, CA 92110                              Twitter:  @alanginusdsba

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