Leading Economic Indicators (August - December 2004)

February 15, 2005 -- The University of San Diego’s Index of Leading Economic Indicators for San Diego County finished 2004 on a strong note with two solid increases in November and December. The breadth of the advances in those last two months was very favorable, with five of the six components up each month. The behavior of the Index forecasts another good year for the local economy in 2005. The forecast is for job growth to be in the 15,000 - 20,000 range for the year, with the upper end of the range more likely than the lower end. The second half of the year is expected to be stronger than the first half, and the unemployment rate will likely hover between 3.5% - 4.0%. Potential problems that could slow growth but not derail it completely include rising interest rates, high oil and gasoline prices, and the uncertainty surrounding the city of San Diego’s fiscal problems.

A major problem in obtaining data prevented the release of the USD Index of Leading Economic Indicators for most of the second half of 2004. The problem seemingly has been resolved. However, this was the third major data problem in the last two years, so nothing is absolutely certain at this point. Here is a recap of the performance of the USD Index during the second half of 2004: After a strong first half of the year, the Index was virtually flat in the third quarter. The fourth quarter began on a down note, with a drop in October that was the first decline since April 2003, a period of 18 months. However, as indicated above, the year ended positively with two good gains in November and December.

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (December) 
Source: University of San Diego 
+ 0.5 % 
Building Permits 
Residential units authorized by building permits in San Diego County (December)) 
Source: Construction Industry Research Board 
+ 0.70% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (December)) 
Source: Employment Development Department 
- 0.09% 
Stock Prices 
San Diego Stock Exchange Index (December)) 
Source: San Diego Daily Transcript 
+ 0.99%
Consumer Confidence 
An index of consumer confidence in San Diego County (December)) 
Source: San Diego Union-Tribune
+ 0.22% 
Help Wanted Advertising 
An index of help wanted advertising in the San Diego Union-Tribune (December)) 
Source: San Diego Union-Tribune
+ 0.66% 
National Economy 
Index of Leading Economic Indicators (December)) 
Source: The Conference Board 
+ 0.33% 

Highlights: Residential units authorized by building permits were down 5.5% in 2004. Single-family units authorized were up 99 units or 1% compared to 2003, while multi-family units authorized were down over 1,100 units or almost 12.5%. . . The labor market variables remain mixed. After falling sharply for over a year (a positive for the Index), initial claims for unemployment insurance edged up slightly in December. The trend was the opposite for help wanted advertising, which turned positive in December after being down six months in a row. . . 2004 was a good year for local stock prices, which surged 21.5% during the year. . . Consumer confidence continues to increase, with that component increasing or remaining unchanged for 19 months in a row. . . The outlook for the national economy is mixed. The national Index of Leading Economic Indicators fell for five months in a row during the period June - October, and then rose the last two months of 2004. The outlook for the national economy is similar to that for the local economy, i.e., moderate growth with the second half likely to be stronger than the first.

The values for the Index of Leading Economic Indicators for San Diego County for the last year are given below:


% Change
 2003 DEC 136.3 +0.8%
 2004 JAN 137.7 +1.1%
FEB 138.9 +0.9%
MAR 140.4 +1.0%
APR 141.1 +0.5%
MAY 141.7 +0.4%
JUN 142.0 +0.2%
JUL 142.0 +0.0%
AUG 142.1 +0.1%
SEP 142.1 +0.0%
OCT 142.0 -0.1%
NOV 142.7 +0.5%
DEC 143.3 +0.5%

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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: (858) 603-3873 

FAX: (858) 484-5304 

E-mail: agin@san.rr.com