Leading Economic Indicators Down Slightly in July

September 6, 2006 --The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.1 percent in July.  Five components were down during the month, with a large increase in initial claims for unemployment insurance (a negative for the Index) leading the way.  The four other declining components (local stock prices, consumer confidence, help wanted advertising, and the outlook for the national economy) were down only slightly.  These were nearly offset by a sharp increase in building permits, the only positive component in the Index. 

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (July) 
Source: University of San Diego 
- 0.1 % 
Building Permits 
Residential units authorized by building permits in San Diego County (July) 
Source: Construction Industry Research Board 
+ 1.75% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (July) 
Source: Employment Development Department 
- 1.53% 
Stock Prices 
San Diego Stock Exchange Index (July) 
Source: San Diego Daily Transcript 
- 0.37%
Consumer Confidence 
An index of consumer confidence in San Diego County (July) 
Source: San Diego Union-Tribune
- 0.14% 
Help Wanted Advertising 
An index of print and online help wanted advertising in San Diego (July) 
Source: Monster Worldwide, San Diego Union-Tribune
- 0.19% 
National Economy 
Index of Leading Economic Indicators (July) 
Source: The Conference Board 
- 0.14% 

July's move was the fourth consecutive monthly decrease in the USD Index of Leading Economic Indicators.  The decline was broad based, with five of the six components down during the month.  Interestingly, almost all of the components turned negative in April and many have remained negative since.  Given the negative indications, the outlook is for a slowing in the local economy towards the end of 2006, with the weakness extending at least through the beginning of 2007.  This weakness will be manifested in the form of slower job growth (about 15,000 compared to the current 18,000 - 19,000) and the unemployment rate edging up to 4.5 percent.

Highlights: Residential units authorized by building permits posted a second straight strong gain after declining for a full year.  Strength in multifamily units authorized is largely responsible for the turnaround. . . The labor market variables were both down in July, indicating weakness in terms of both job losses and hiring plans.  While still relatively low compared to historic levels,  initial claims for unemployment insurance are up more than 20% from the low reached in November of 2005.  Help wanted advertising remains weak, with an increase in online advertising only partially offsetting declines in print advertising.  The consequence is that the local unemployment rate has increased to 4.3 percent in July after being under 4 percent for much of the spring. . . After finishing 2005 and beginning 2006 with a rebound, consumer confidence has slipped again.  The war in Iraq, high gas prices, an uncertain housing market, and political turmoil locally, nationally, and internationally are some of the reasons for consumer pessimism.  Consumer spending could by adversely affected, which is significant because consumer spending is typically two-thirds of economic activity. . . With the Nasdaq Composite Index in the red for the year, local stock prices remain under pressure.  They have mirrored the overall Index and have fallen for four months in a row. . . The national Index of Leading Economic Indicators indicates potential problems for the national economy.  Although down only slightly in July, the national Index has decreased in three of the last four months and four of the last six.  A weak national economy would hurt San Diego's tourism industry and those firms who sell products nationally. 

The Index of Leading Economic Indicators for San Diego County stood at 142.4 in July, down slightly from June's reading.  Please visit the Index of Leading Economic Indicators Website at the address below to get the values for any revised components.  The values for the Index of Leading Economic Indicators for San Diego County for the last year are given below:


% Change
2005 JUL 142.5 +0.1%
AUG 142.6 +0.1%
SEP 142.1 -0.4%
OCT 142.1 +0.0%
NOV 142.7 +0.4%
DEC 143.0 +0.3%
2006 JAN 143.2 +0.1%
FEB 143.8 +0.4%
MAR 144.2 +0.3%
APR 143.8 -0.3%
MAY 142.8 -0.7%
JUN 142.5 -0.2%
JUL 142.4 -0.1%

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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