Leading Economic Indicators, July 2015

August 31, 2015 — The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County fell 0.4 percent in July. Five of the six components in the Index were down, led by big drops in initial claims for unemployment insurance and help wanted advertising. Down more moderately was consumer confidence and the outlook for the national economy. Building permits were also negative, but only slightly so. The only positive component was local stock prices, which were up strongly in July.

July’s decrease broke a string of thirteen consecutive monthly increases in the USD Index. Although the increase in the Index had slowed in recent months, the decline was unexpected as a couple of recently strong components (building permits and the outlook for the national economy) turned negative. Despite the drop and despite concern that five of the six components were negative, the outlook for positive growth in the local economy remains unchanged for now. Economists look for three consecutive changes in a leading index as a signal of a turning point in an economy, so the months ahead are critical. The numbers for the local economy remain good at this moment, with the unemployment rate at 5 percent and year-over-year job growth approaching 50,000. But there is concern about the deterioration of the labor market components in the Index (see below), and these need to be watched carefully in the months ahead, particularly in light of the recently announced layoffs at Qualcomm.

Index of Leading Economic Indicators

The index for San Diego County that includes the components listed below (July)

Source: USD Burnham-Moores Center for Real Estate

Building Permits

Residential units authorized by building permits in San Diego County (July)

Source: U.S. Census Bureau

Unemployment Insurance

Initial claims for unemployment insurance in San Diego County, inverted (July)

Source: Employment Development Department

Stock Prices

San Diego Stock Exchange Index (July)

Source: San Diego Daily Transcript


Consumer Confidence

An index of consumer confidence in San Diego County , estimated (July)

Source: The Conference Board

Help Wanted Advertising

An index of online help wanted advertising in San Diego (July)

Source: The Conference Board

National Economy

Index of Leading Economic Indicators (July)

Source: The Conference Board


Highlights:  Although the decline in residential units authorized by building permits was minor, it broke a string of six consecutive monthly increases in the component, with all six of those increases being significant. This drop was due to permits for only 207 multi-family units being authorized in July, which is the lowest number for any month this year. . . After turning negative for the first time in months in June, both labor market components accelerated their moves to the downside in July. Initial claims for unemployment insurance jumped above the 16,000 mark for the first time since last August, while help wanted advertising hit its lowest level since October. This has not been reflected yet in the local labor market, where seasonally adjusted local unemployment rate was 5.0 percent in July. This was up compared to the 4.8 percent rate in June but down a lot from the 6.5 percent rate in July 2014. . . Local stock prices did well in July, matching the performance of the broader market averages. Local stocks had run counter to the broader averages the last two months. With the recent turmoil in the markets, though, this component is likely to turn negative for August. . . Sentiment among consumers continues to fall, with local consumer confidence dropping for the third consecutive month, with the trend being more negative with each month. . . The national Index of Leading Economic Indicators dropped for the first time since February. As was the case with building permits, the drop came even though the component had been up strongly in recent months. Similar to the local Index, it remains to be seen whether this is a one month aberration or whether this signals a negative turning point for the national economy. GDP growth for the second quarter was strong, with the “second” estimate coming in at a higher than expected 3.7 percent annualized rate. This compares to the “advance” estimate of 2.3 percent and a growth rate of 0.6 percent in the first quarter.

July’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 139.6, down from June’s reading of 140.1. There were revisions in the previously reported values of the Index for March and April and in the changes in the Index for March and May.

          Index      % Change


JUL     128.0           +0.3

AUG    128.3           +0.3

SEP     129.0           +0.5

OCT    129.7           +0.5

NOV    131.4           +1.3

DEC    132.4           +0.7


JAN     134.2           +1.4

FEB     135.8           +1.2

MAR    137.7           +1.4

APR    138.9           +0.8

MAY    139.6           +0.5

JUN     140.1           +0.4

JUL     139.6         -0.4

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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