Leading Indicators Up In May

July 16, 1998--The University of San Diego's Index of Leading Economic Indicators for San Diego County rose 0.2 percent in May. Solid gains by initial claims for unemployment insurance, local stock prices, and consumer confidence led the month to the upside. Help wanted advertising increased slightly, while the outlook for the national economy was unchanged. These positive developments offset a moderate decline in building permits to propel the Index upward for the 37^th time in 38 months.

	Index of Leading Economic Indicators  The index for San Diego County that includes the components listed below (May) Source: University of San Diego	+ 0.2 %
	Building Permits  Residential units authorized by building permits in San Diego County (May)  Source: Construction Industry Research Board	-0.88%
	Unemployment Insurance  Initial claims for unemployment insurance in San Diego County, inverted (May)  Source: Employment Development Department	+0.53%
	Stock Prices  San Diego Stock Exchange Index (May)  Source: San Diego Daily Transcript	+0.55%
	Consumer Confidence  An index of consumer confidence in San Diego County (May)  Source: San Diego Union-Tribune	+0.64%
	Help Wanted Advertising  An index of help wanted advertising in the San Diego Union-Tribune (May)  Source: Greater San Diego Chamber of Commerce	+ 0.14%
	National Economy  Index of Leading Economic Indicators (May)  Source: The Conference Board	+ 0.00%

Last month’s report indicated that the local Index of Leading Economic Indicators increased by 0.1% in April. However, a downward revision in the national Index of Leading Economic Indicators from a gain of 0.16% to being unchanged cause the local index to be revised to unchanged as well. This broke a string of 36 consecutive monthly increases in the local index. Rather than signaling the start of a downward trend, the flat result in April appears to be an aberration, as the Index bounced back with a good gain in May. So the outlook for the local economy remains positive for the rest of the year, and is likely to be so through the early part of 1999 as well.

The behavior of the national Index of Leading Economic Indicators should be monitored in the coming months. It has now been unchanged for two consecutive months. Although not negative, it does mark the first time in over two years where the outlook for the national economy has not been positive for two months in a row. There is some concern that the economic crisis in Asia will have adverse impacts on the U.S. economy. That in turn would affect San Diego companies that operate in a national market. Also potentially affected is the region’s third largest industry, tourism. A slowdown in the national economy would mean less leisure travel, and San Diego would suffer as a result. However, there have been concerns and conflicting signals about the national economy for years, yet economic conditions remain ideal. The national leading economic indicators being unchanged may be just another false alarm.

Last month’s report indicated that an eye should be kept on the labor market variables. While help wanted advertising continued to edge up only slowly, there was a healthy decrease in initial claims for unemployment insurance in May (a positive for the Index). Although it would be desirable for help wanted advertising to grow more rapidly, it appears that the labor market will continue to be strong for the foreseeable future.

May's increase puts the Index of Leading Economic Indicators for San Diego County at 143.1, up from April’s reading of 142.8. April’s figure reflects a downward revision from the previously reported value of 142.9 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
1997	MAY	134.5	+0.3%
	JUN	135.1	+0.4%
	JUL	135.7	+0.4%
	AUG	136.4	+0.5%
	SEP	137.4	+0.7%
	OCT	139.0	+1.2%
	NOV	140.6	+0.7%
	DEC	141.4	+0.6%
1998	JAN	142.0	+0.4%
	FEB	142.6	+0.4%
	MAR	142.8	+0.1%
	APR	142.8	+0.0%
	MAY	143.1	+0.2%

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