Leading Economic Indicators Up in April

Note: The tentative release date for next month's report is June 25.

May 28, 2009 -- The University of San Diego's Index of Leading Economic Indicators for San Diego County rose 0.2 percent in April.  A sharp reversal in local consumer confidence, supported by solid gains in building permits, local stock prices, and the outlook for the national economy, allowed the USD Index to break a string of 24 consecutive monthly declines.  April also marked the first time since March 2007 that more components were up than down.  Not all the news was positive, as initial claims for unemployment insurance and help wanted advertising were both down sharply.

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (April) 
Source: University of San Diego 
+ 0.2 % 
Building Permits 
Residential units authorized by building permits in San Diego County (April) 
Source: Construction Industry Research Board 
+ 1.24% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted, estimated  (April) 
Source: Employment Development Department 
- 2.66% 
Stock Prices 
San Diego Stock Exchange Index (April) 
Source: San Diego Daily Transcript 
+ 2.33%
Consumer Confidence 
An index of consumer confidence in San Diego County (April) 
Source: San Diego Union-Tribune
+ 2.78% 
  Help Wanted Advertising 
An index of online help wanted advertising in San Diego (April) 
Source: Monster Worldwide
- 4.49% 
National Economy 
Index of Leading Economic Indicators (April) 
Source: The Conference Board 

While caution needs to be exercised about drawing conclusions from just a single month’s worth of data, this is definitely good news at a time when there hasn’t been much about the local economy.  In addition to being down every month for two full years, the USD Index had been down 35 out of the last 36 months, and last six months were the six biggest monthly declines on record.  Since economists typically look for three consecutive moves in one direction for a leading index to signal a turning point, it remains to be seen if a turnaround is in sight.  If it is signaled in the next couple of months, the timing looks to be towards the end of this year or the first part of 2010.  Even if a bottom is reached, it is likely that the rebound from there will be weak.  Indeed, there could be a significant period where the local economy remains flat after reaching that bottom.

Highlights: Another solid month for residential units authorized by building permits reversed a seven-month negative trend in that component.  More residential units were authorized in March and April than in the previous five months combined, and it was the best two month total since July and August of last year. . . As was mentioned earlier, the two labor market variables, initial claims for unemployment insurance and help wanted advertising, continued their negative slide.  The net result was that the local unemployment rate still remains at a high 9.1 percent, with the number of jobs down 45,300 countywide in April compared to the same month last year. . . Local consumer confidence registered the biggest one month turnaround ever recorded by any component in the Index.  Given that a one percent change in any direction is considered a significant move, the shift from a decline of 3.27 percent in March to a gain of 2.78 percent in April represents a sea change in consumer sentiment.  This ends a stretch of 23 straight monthly decreases in local consumer confidence, almost every one of which was a significant drop.  The San Diego Union-Tribune reports that, while the current outlook remains relatively unchanged, consumers have become much more positive about their future prospects.  The key to turning things around is if this increased consumer confidence translates into increased purchases, particularly of bigger ticket items such as houses and automobiles. . . Local stock prices rallied with the rest of the financial markets off of the lows reached in March. . . The national Index of Leading Economic Indicators had its first increase in a year, and it was the strongest gain since June 2005.  As is the case with the local index, more data is needed before a trough in the national economy is signaled.

April’s decrease puts the USD Index of Leading Economic Indicators for San Diego County at 100.9, up from March’s reading of 100.7.  Revised data for building permits and the national Index of Leading Economic Indicators led to a revision in the values of the USD Index for November through February and revisions in the previously reported changes for November and February.  Please visit the Website address given below to see the revised changes for the individual components.  The values for the USD Index for the last year are given below:


% Change
2008 APR 121.1 -1.3%
  MAY 119.8 -1.1%
  JUN 118.6 -1.0%
  JUL 117.2 -1.3%
  AUG 116.3 -0.8%
  SEP 115.4 -0.8%
  OCT 112.8 -2.2%
  NOV 110.6 -2.0%
  DEC 108.2 -2.2%
2009 JAN 105.8 -2.3%
  FEB 102.9 -2.7%
  MAR 100.7 -2.2%
  APR 100.9 +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