Leading Indicators Down in August

Note: This is the 10th Anniversary edition of the Index of Leading Economic Indicators!

October 19, 2001 --The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.6 percent in August. Three of the components--initial claims for unemployment insurance, local stock prices, and help wanted advertising–were down sharply during the month. Two others–building permits and the outlook for the national economy–experienced more moderate losses. The only positive component was consumer confidence, which had a very strong gain.
The USD Index of Leading Economic Indicators is published under the auspices of the School of Business Administration's Real Estate Institute. For more information about the Institute, please visit its Website at http://realestate.sandiego.edu

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (August) 
Source: University of San Diego 
- 0.6 % 
Building Permits 
Residential units authorized by building permits in San Diego County (August) 
Source: Construction Industry Research Board 
- 0.49% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (August) 
Source: Employment Development Department 
- 1.33% 
Stock Prices 
San Diego Stock Exchange Index (August) 
Source: San Diego Daily Transcript 
- 1.00%
Consumer Confidence 
An index of consumer confidence in San Diego County (August) 
Source: San Diego Union-Tribune
+ 1.11% 
Help Wanted Advertising 
An index of help wanted advertising in the San Diego Union-Tribune (August) 
Source: Greater San Diego Chamber of Commerce 
- 1.69% 
National Economy 
Index of Leading Economic Indicators (August) 
Source: The Conference Board 
- 0.49% 

The drop in August was the seventh in a row for the USD Index of Leading Economic Indicators, which has now fallen or remained unchanged for 15 consecutive months. This is also the sixth straight month where at least five of the six components were negative. All of this was happening before the attacks on the United States on September 11, the subsequent military action in Afghanistan, and the recent anthrax incidents. What is going to be the economic impact of those events? It’s likely that the national economy, which was already slowing, will experience a downturn in the third quarter that will reach the definition of a recession (at least two quarters of negative growth in Gross Domestic Product). The local economy will be adversely affected by the downturn nationally, particularly those firms that export to national and international markets. Also hurt will be those firms associated with the tourism, which is San Diego’s third largest industry, as the economic downturn combined with a fear of travel takes its toll. Despite these problems, San Diego is likely to fare better than both the national and state economies. There is not the concentration of cyclical or "smokestack" industries such as automobiles or steel that would be deeply affected by a downturn in the business cycle. With a well-diversified economy, San Diego is in a better position to weather the near-term economic difficulties than most parts of the country.

Highlights: Residential units authorized by building permits continue to lag the pace set in 2000, although only slightly. Housing prices have not yet been affected by the attacks on September 11, but sales slowed considerably in September. That will undoubtedly have an effect on construction activity as measured by building permits. . . The labor market components remain under pressure, with initial claims for unemployment insurance and help wanted advertising continuing their negative trends. The 14,660 initial claims filed in August is the highest monthly total since March 1999 and represents a 14% jump compared to the same month in 2000. On the other hand, help wanted advertising is down 25% over that same period. However, the county’s unemployment rate remains at a relatively low 3.3% in September, which is up slightly from a year ago. . . Local stock prices have now fallen for 15 months in a row. . . After leading the local Index of Leading Economic Indicators downward for more than a year, consumer confidence staged a major turnaround in August, going from strongly negative in recent months to sharply higher. It appears that local consumers reacted positively when forecasted crises involving electricity and gasoline failed to materialize over the summer. It remains to be seen how much that upward momentum will be affected by the events of September 11. . . The drop in the national Index of Leading Economic Indicators broke a string of four straight gains in that component.

August's decrease puts the Index of Leading Economic Indicators for San Diego County at 137.3, down from July’s reading of 138.2. The fluctuations of the Index of Leading Economic Indicators for San Diego County for the last year are given below:

    Index  % Change 
2000 AUG 149.6 -0.5%
  SEP 149.0 -0.4%
  OCT 148.3 -0.5%
  NOV 147.5 -0.6%
  DEC 146.8 -0.4%
2001 JAN 146.8 +0.0%
  FEB 146.2 -0.4%
  MAR 144.6 -1.2%
  APR 142.6 -1.4%
  MAY 140.8 -1.3%
  JUN 139.4 -1.0%
  JUL 138.2 -0.8%
  AUG 137.3 -0.6%

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