Leading Indicators Down in July

September 18, 2002 --The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.8 percent in July. A sharp increase in initial claims for unemployment insurance (a negative for the Index) and big drops in building permits and local stocks led the move to the downside. There was also a moderate decline in the outlook for the national economy. The only positive component was help wanted advertising, which rose sharply during the month. Consumer confidence was virtually unchanged, although with a slight negative bias.
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 (July) 
Source: University of San Diego 
- 0.8 % 
Building Permits 
Residential units authorized by building permits in San Diego County (July) 
Source: Construction Industry Research Board 
- 1.25% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (July) 
Source: Employment Development Department 
- 2.38% 
Stock Prices 
San Diego Stock Exchange Index (July) 
Source: San Diego Daily Transcript 
- 1.56%
Consumer Confidence 
An index of consumer confidence in San Diego County (July) 
Source: San Diego Union-Tribune
- 0.06% 
Help Wanted Advertising 
An index of help wanted advertising in the San Diego Union-Tribune (July) 
Source: Greater San Diego Chamber of Commerce 
+ 1.33% 
National Economy 
Index of Leading Economic Indicators (July) 
Source: The Conference Board 
- 0.65% 

July’s decrease was the fourth in a row for the USD Index of Leading Economic Indicators, and was the largest one-month decline since September 2001. The breadth of the decline was decidedly negative, with five of the components declining against only one advancing. A look at the chart on the back showing the performance of the Index shows that a "W" or double dip pattern developing. The result is that the local economy will likely remain sluggish through the end of 2002, as manifested by an unemployment rate that will hover in the high 3%, low 4% range. Key to a turnaround in the local economy will be the performance of the national economy and geopolitical developments with regards to military action against Iraq.

Highlights: Despite soaring housing prices and rents, residential construction activity as measured by residential units authorized by building permits remain weak. Residential units authorized are on a pace to hit 13,500 for all of 2002, down from the 15,650 units authorized in 2001. The big problem is in multi-family housing, where only 62 units were authorized in July, compared to a monthly average of over 500 units for the last three and a half years. . . The labor market components continue to move in opposite directions. While initial claims for unemployment insurance were negative for the fifth straight month, help wanted advertising had its biggest one-month increase in more than two years. The combination led to a jump in the unemployment rate in San Diego County to 4.4% in July, which is the highest level in nearly five years (September 1997). . . Local stock prices fell in July along with the rest of the equity markets as news of corporate scandals battered share prices. . . The weak stock markets, negative news about corporate behavior, and worries about an impending conflict with Iraq took its toll on local consumer confidence, which dropped after seven months of relatively strong gains. This is a key development as strong consumer spending has been credited with bolstering an otherwise lackluster economy. . . The national Index of Leading Economic Indicators declined for the second month in a row as economists remain concerned about the strength of an economic recovery at the national level. Preliminary estimates of second quarter Gross Domestic Product (GDP) growth came in at a relatively weak 1.1% annual rate, down from the revised 5.0% growth rate of the first quarter.

July's decrease puts the Index of Leading Economic Indicators for San Diego County at 136.5, down from June’s reading of 137.5. The values for the Index of Leading Economic Indicators for San Diego County for the last year are given below:

    Index  % Change 
2001 JUL 140.0 -0.7%
  AUG 139.3 -0.5%
  SEP 138.1 -0.9%
  OCT 137.3 -0.5%
  NOV 136.8 -0.4%
  DEC 137.3 +0.4%
2002 JAN 137.8 +0.3%
  FEB 138.2 +0.3%
  MAR 138.8 +0.5%
  APR 138.5 -0.2%
  MAY 138.3 -0.2%
  JUN 137.5 -0.5%
  JUL 136.5 -0.8%

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@cox.net