Leading Indicators Down in September

November 21, 2000 --The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.5 percent in September. The decline was led by another sharp drop in consumer confidence. There were more moderate declines in building permits, local stock prices, and help wanted advertising. On the plus side, initial claims for unemployment insurance fell during the month, which is a positive for the Index. The outlook for the national economy was unchanged.

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (September) 
Source: University of San Diego 
- 0.5 % 
Building Permits 
Residential units authorized by building permits in San Diego County (September) 
Source: Construction Industry Research Board 
- 0.78% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (September) 
Source: Employment Development Department 
+ 0.27% 
Stock Prices 
San Diego Stock Exchange Index (September) 
Source: San Diego Daily Transcript 
- 0.47%
Consumer Confidence 
An index of consumer confidence in San Diego County (September) 
Source: San Diego Union-Tribune
- 1.25% 
Help Wanted Advertising 
An index of help wanted advertising in the San Diego Union-Tribune (September) 
Source: Greater San Diego Chamber of Commerce 
- 0.50% 
National Economy 
Index of Leading Economic Indicators (September) 
Source: The Conference Board 
+ 0.00% 

With September's decline, the USD Index of Leading Economic Indicators has now dropped for three months in a row. The breadth of the decrease improved over August, when all six of the components were down. But it remains decidedly negative with four components down compared to only one component up. Normally, the three consecutive decreases in the Index would signal a negative turning point for the local economy. But, as was discussed in last month’s report, some of the components are showing declines from relatively high levels. Thus, the outlook for San Diego’s economy is more likely a slowing of the rapid expansion of the last couple of years, as opposed to a downturn. Similar to the national economy, a soft landing as opposed to a crash is the most likely scenario.

Consumer confidence continues to be the main culprit in the decline of the Index. The reasons for the deterioration in consumer confidence have been discussed in previous reports. Also showing increased weakness in September was the number of residential units authorized by building permits. Through September, total units authorized for 2000 were running 10% below the level for the same period in 1999. However, 2000 still looks like it will be the second best year for building permits since 1990.

One positive development in September was the drop in initial claims for unemployment insurance. The 10,590 claims filed during the month were just slightly above the level for April of this year, when initial claims reached a 13-year low. Thus, the rate of job loss in San Diego County remains at low levels not seen in more than a decade. Even when the figure is seasonally adjusted to reflect the fact that September is normally a low month for initial claims, the level of claims is the best that it has been since early 1989.

September's decrease puts the Index of Leading Economic Indicators for San Diego County at 148.9, down from August's reading of 149.6. There were no revisions in any of the individual components or for the Index as a whole for the month. The fluctuations of the Index of Leading Economic Indicators for San Diego County for the last year are given below:

    Index  % Change 
1999 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%
  AUG 149.6 -0.5%
  SEP 148.9 -0.5%

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.