Leading Economic Indicators Down Slightly in October

November 30, 2006 -- The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.1 percent in October.  Leading the way to the downside were building permits and initial claims for unemployment insurance, with help wanted advertising registering a smaller loss.  These were nearly offset by moderate gains in local stock prices, consumer confidence, and the outlook for the national economy. 

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (October) 
Source: University of San Diego 
- 0.1 % 
Building Permits 
Residential units authorized by building permits in San Diego County (October) 
Source: Construction Industry Research Board 
- 0.83% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (October) 
Source: Employment Development Department 
- 0.76% 
Stock Prices 
San Diego Stock Exchange Index (October) 
Source: San Diego Daily Transcript 
+ 0.48%
Consumer Confidence 
An index of consumer confidence in San Diego County (October) 
Source: San Diego Union-Tribune
+ 0.54% 
Help Wanted Advertising 
An index of print and online help wanted advertising in San Diego (October) 
Source: Monster Worldwide, San Diego Union-Tribune
- 0.28% 
National Economy 
Index of Leading Economic Indicators (October) 
Source: The Conference Board 
+ 0.42% 

October's drop was the seventh consecutive monthly decrease for the USD Index of Leading Economic Indicators.  On a positive note, the decrease in October was the smallest of the seven months.  For a second straight month, the number of advancing components was equal to the number of declining ones at three apiece.  It remains to be seen whether the Index is on the verge of turning positive or will continue its downward trend.  The forecast continues to be for a relatively weak local economy at least through the first half of 2007.  In addition to being weighed down by a slowing national economy, the weak housing market will hurt the local economy in three areas: slow or negative job growth in construction and real estate-related jobs, weaker consumer spending due to lower home equity and a "reverse wealth effect" (people feeling poorer as the values of their homes decline), and more homes lost to foreclosures, particularly by those who stretched themselves to get into the housing market, many times with unconventional home loans.

Highlights: Residential units authorized by building permits fell again as the weak housing market continued to take a toll on construction activity.  Single-family building permits continue to be particularly hard hit, with the 259 single-family units authorized in October being the lowest number since 224 units were authorized in November 1994.  One impact this is having on the local economy is that construction employment declined on a year-over-year basis for the first time since June 1994. . . Both labor market variables were down for the second straight month.  Initial claims for unemployment insurance have now risen (a negative for the Index) for seven months in a row.  Help wanted advertising dropped in October as print advertising fell and online advertising edged up only slightly.  The strongest sectors for online advertising were "Computer and Mathematical" and "Healthcare Support."  While employment growth is expected to slow in 2007, the already low unemployment rate dropped further to 3.6 percent in October. . .  Consumer confidence continues to rebound from recent lows as gas prices continued to fall in October.  Will a post-election boost in gas prices send confidence sinking again? . . . Local stock prices continue to benefit from the surge in the stock market that saw the Dow Jones Industrial Average reach numerous new all-time highs in October. . . The national Index of Leading Economic Indicators rose for the second month in a row despite worries of a slowdown in the national economy.  Policy makers, particularly at the Federal Reserve, find themselves in a quandary trying to balance concerns about inflation with worries about the impact of a rapidly slumping national housing market.

October=s decrease puts the Index of Leading Economic Indicators for San Diego County at 141.0, down from September=s revised reading of 141.1.  Revisions in building permits and the national Index of Leading Economic Indicators caused the previously reported change of -0.3 percent for September to be adjusted slightly upward to -0.2 percent.  The values for the Index of Leading Economic Indicators for San Diego County for the last year are given below:


% Change
2005 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 142.2 -0.2%
AUG 141.4 -0.6%
SEP 141.1 -0.2%
OCT 141.0 -0.1%

Home - All Months

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