Leading Indicators Down in September

November 10, 1998--The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.4 percent in September. A sharp drop in local stock prices fueled the downward move. There were smaller declines in consumer confidence and help wanted advertising. On the positive side, building permits and initial claims for unemployment insurance were moderately higher. 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	- 0.4 %
	Building Permits  Residential units authorized by building permits in San Diego County (September)  Source: Construction Industry Research Board	+0.60%
	Unemployment Insurance  Initial claims for unemployment insurance in San Diego County, inverted (September)  Source: Employment Development Department	+0.37%
	Stock Prices  San Diego Stock Exchange Index (September)  Source: San Diego Daily Transcript	-2.90%
	Consumer Confidence  An index of consumer confidence in San Diego County (September)  Source: San Diego Union-Tribune	-0.12%
	Help Wanted Advertising  An index of help wanted advertising in the San Diego Union-Tribune (September)  Source: Greater San Diego Chamber of Commerce	- 0.48%
	National Economy  Index of Leading Economic Indicators (September)  Source: The Conference Board	+ 0.00%

September’s decline was the first for the Index since March 1995, breaking a string of 41 consecutive monthly increases. March 1995 was also the last time that as many as three of the components of the Index were negative. Since economists usually look for three consecutive changes in a leading index before concluding that a turning point has been reached in an economy, it would be premature to forecast a recession for San Diego. The national Index of Leading Economic Indicators fell in both May and June, but never declined for the third consecutive month. So there is definitely time for things to turn around. But September’s decline should serve as a warning of some potential slowing of the local economy, perhaps in the second half of 1999.

September’s decline was led by a sharp drop in local stock prices. Investors are showing concern about the prospects for local companies, particularly in the wake of the economic crisis in Asia. The turmoil in the world financial markets may have adversely affected local consumer sentiment, as the consumer confidence measure turned negative for the first time since its inclusion in the Index. Hard evidence of the impact of global economic difficulties can be found in the reduction of help wanted advertising, as firms pull back from expansion plans and also scale back by leaving open vacant positions. On a positive note, despite the announcement of job cuts by some local firms, the level of job losses has not picked up, as is reflected by continued declines in initial claims for unemployment insurance.

The University of San Diego’s Index of Leading Economic Indicators for San Diego County is now being published under the auspices of the University’s Institute for Real Estate and Regional Development. For more information about the Institute and its activities, please contact Prof. Mark Riedy at (619) 260-4872.

September's increase puts the Index of Leading Economic Indicators for San Diego County at 143.3, down from August’s reading of 143.8. Although August building permits were revised downward, there was no revision of the previously reported change of +0.2% 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	AUG	136.4	+0.5%
	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	142.9	+0.1%
	MAY	143.1	+0.1%
	JUN	143.2	+0.1%
	JUL	143.5	+0.2%
	AUG	143.8	+0.2%
	SEP	143.3	-0.4%

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