Leading Indicators Down in July

September 21, 2000 --The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.3 percent in July. The drop was fueled by a sharp loss in consumer confidence and smaller declines in building permits, initial claims for unemployment insurance, local stock prices, and the outlook for the national economy. The only positive component was help wanted advertising, which was up slightly during the month.

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (July) 
Source: University of San Diego 
- 0.3 % 
Building Permits 
Residential units authorized by building permits in San Diego County (July) 
Source: Construction Industry Research Board 
- 0.19% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (July) 
Source: Employment Development Department 
- 0.06% 
Stock Prices 
San Diego Stock Exchange Index (July) 
Source: San Diego Daily Transcript 
- 0.31%
Consumer Confidence 
An index of consumer confidence in San Diego County (July) 
Source: San Diego Union-Tribune
- 1.25% 
Help Wanted Advertising 
An index of help wanted advertising in the San Diego Union-Tribune (July) 
Source: Greater San Diego Chamber of Commerce 
+ 0.12% 
National Economy 
Index of Leading Economic Indicators (July) 
Source: The Conference Board 
- 0.16% 

July's decrease was the first decline in the USD Index of Leading Economic Indicators since December 1998. The breadth of the decline was broad, with five of the six components down during the month. But it was not deep, as only one of the components (consumer confidence) was down significantly. Since economists usually look for three consecutive changes in a leading index before forecasting a change in an economy's direction, the drop in July does not signal that a downturn in San Diego's economy is either imminent or inevitable. But it could be an indication that we will see a slowing in the local economy's rapid growth sometime in the first half of 2001.

The biggest news in terms of the individual components is the continuing drop in consumer confidence. July's decline was the fifth consecutive monthly decrease in that component. A host of bad news locally, including soaring electricity and gas prices, high housing costs, and a downturn in some local stocks, e.g., a two-thirds drop in the price of Qualcomm shares from their high, have battered the psyches of local consumers. This is significant because consumption is such a large part of any economy, including the local one.

Another interesting development is that the national Index of Leading Economic Indicators has now decreased for three months in a row. None of the declines has been very large, but it may be a sign of a weaker national economy at the beginning of 2001. This is in line with the "election business cycle," where the economy continues to advance and will not turn downward until after an election. Look for a cut in interest rates by the Federal Reserve sometime in 2001 to counter a slowdown in the national economy.

July's decrease puts the Index of Leading Economic Indicators for San Diego County at 150.3, down from June's reading of 150.8. The fluctuations of the Index of Leading Economic Indicators for San Diego County for the last year are given below:

    Index  % Change 
1999 JUL 143.8 +0.3%
  AUG 144.1 +0.3%
  SEP 144.9 +0.5%
  OCT 145.4 +0.3%
  NOV 146.0 +0.4%
  DEC 146.6 +0.5%
2000 JAN 147.9 +0.8%
  FEB 148.8 +0.6%
  MAR 149.8 +0.7%
  APR 150.7 +0.6%
  MAY 150.8 +0.1%
  JUN 150.8 +0.0%
  JUL 150.3 -0.3%

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

Professor Alan Gin 
School of Business Administration 
University of San Diego 
5998 Alcalá Park 
San Diego, CA 92110 
TEL: (619) 260-4883 

FAX: (619) 501-2954 

E-mail: agin@home.com 

The Index of Leading Economic Indicators is published by USD’s Real Estate Institute (REI). For more information about the REI, please contact Mark Riedy at (619) 260-4872.