Leading Economic Indicators Up in June

August 24, 2004 --The University of San Diego's Index of Leading Economic Indicators for San Diego County rose 0.2 percent in June.  As has been the case since the beginning of the year, the gain was led by a positive change in initial claims for unemployment insurance.  Stock prices and consumer confidence were both up to a smaller extent.  Building permits, help wanted advertising, and the outlook for the national economy were all down modestly. 

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (June) 
Source: University of San Diego 
+ 0.2 % 
Building Permits 
Residential units authorized by building permits in San Diego County (June) 
Source: Construction Industry Research Board 
- 0.62% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (June) 
Source: Employment Development Department 
+ 1.78% 
Stock Prices 
San Diego Stock Exchange Index (June) 
Source: San Diego Daily Transcript 
+ 0.51%
Consumer Confidence 
An index of consumer confidence in San Diego County (June) 
Source: San Diego Union-Tribune
+ 0.15% 
Help Wanted Advertising 
An index of help wanted advertising in the San Diego Union-Tribune (June) 
Source: San Diego Union-Tribune
- 0.16% 
National Economy 
Index of Leading Economic Indicators (June) 
Source: The Conference Board 
- 0.48% 

June's increase means that the USD Index of Leading Economic Indicators has increased every month for the last year.  However, the gain in June was the smallest monthly change since August 2003, and the ratio of positive indicators to negative ones (three each) is weak.  Since this is data for only one month, it is not yet time to draw any conclusions about a possible downturn in the  Indicators.  A careful examination of the next few months is in order, but for now, the outlook for the local economy remains positive.

One factor that is likely to impact the local economy in the months ahead is the high price of oil, which, at this writing, is nearing $50 a barrel.  Since there is not a lot of major manufacturing in San Diego and no need for heating oil, the biggest impact here is on the price of gasoline.  Although off its high, the price of gasoline remains well over $2 a gallon.  My estimate is that, for every 10 cent per gallon increase in the price of gasoline, consumers in San Diego County spend $7 million more per month on gasoline instead of on other purchases.  While not a large percentage of the local economy, it is certainly not helpful at a time when the economy could use every boost that it can get.  It's likely that gasoline prices will remain above $2 a gallon and possibly go higher in the near future.

Highlights: The news on residential units authorized by building permits is mixed.  While single-family units authorized are up more than 7% compared to the same period in 2003, weakness in the multi-family sector pulled total units authorized down 3.6% through the second quarter of 2004. . . Also mixed is the labor market.  Job loss remains low as evidenced by another fall in  initial claims for unemployment insurance.  However, the hiring side of the labor market remains weak.  Help wanted advertising, which has been positive but not spectacular, turned negative after 10 consecutive monthly increases.  One consequence of this mixed news is that the local unemployment rate edged up to 4.2% in June. . . Consumer confidence continues to increase, although the gain in June was second straight month of where the gain was slight compared to big increases experienced at the end of 2003. . .  Local stock prices rebounded in June after falling in May.  San Diego stocks gained 0.87% in the second quarter of 2004, compared to gains of 0.75% for the Dow Jones Industrial Average and 2.69% for the NASDAQ Composite Index. . . The outlook for the national economy turned cloudy in June, with the national Index of Leading Economic Indicators turning negative for the first time in 15 months.  Higher energy prices and an increase in interest rates are beginning to take a toll on the recovery at the national level.   

June's increase puts the Index of Leading Economic Indicators for San Diego County at 142.0, up from May's reading of 141.7.  The values for the Index of Leading Economic Indicators for San Diego County for the last year are given below:


% Change
 2003 JUN 132.8 +0.0%
  JUL 132.9 +0.1%
  AUG 133.2 +0.2%
SEP 133.8 +0.5%
OCT 134.2 +0.3%
NOV 135.2 +0.8%
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% 

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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