Leading Economic Indicators Down Sharply in August

Note: The tentative release date for the 20th anniversary edition of the Leading Economic Indicators is October 25.

September 27, 2011 -- The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County fell 1.0 percent in August.  The downward move was led by sharp declines in local stock prices, consumer confidence, and building permits.  These overwhelmed moderate increases in help wanted advertising and the outlook for the national economy and a smaller gain in initial claims for unemployment insurance to push the USD Index to its largest decline since March 2009.   

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (August
Source: USD
 Burnham-Moores Center for Real Estate
- 1.0 % 
Building Permits 
Residential units authorized by building permits in San Diego County (August)
Source: Construction Industry Research Board
- 1.30% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (August

Source: Employment Development Department 
+ 0.07% 
Stock Prices 
San Diego Stock Exchange Index (August) 
Source: San Diego Daily Transcript 
- 3.15%
Consumer Confidence 
An index of consumer confidence in San Diego County, estimated  (August)
Source: The Conference Board
- 2.85% 

Help Wanted Advertising 
An index of online help wanted advertising in San Diego (August) 
Source: Monster Worldwide
+ 0.72% 
National Economy 
Index of Leading Economic Indicators (August)
Source: The Conference Board 
+ 0.50% 

With the USD Index now having fallen for two of the last three months, there are serious questions about the near term outlook for the local economy.  Economists usually look for three consecutive changes in a leading index in one direction to signal a turning point in an economy.  While that threshold has not yet been met, the magnitude of the decrease is troubling.  The two measures of sentiment in the Index, local stock prices and consumer confidence, collapsed in August, indicating that both investors and consumers have serious concerns about the economy.  As discussed below, the economic and political situations have gotten people in an ugly and pessimistic a mood that has not been observed for a long time.  Whether that translates into trouble for the economy remains to be seen.  For now, the outlook remains for positive but slow growth in the local economy through the first part of 2012.  What happens after that is up in the air, and more data will be needed in the coming months to clarify the situation..

Highlights:  Residential units authorized by building permits were down for the third straight month.  Due to a strong beginning of the year, residential units authorized for 2011 through August have already topped the total for all of 2010.  But the numbers have dropped off significantly in recent months. . . In all the gloom, both of the labor market variables were up during the month.  Initial claims for unemployment insurance were positive, although just barely so.  On the hiring front, help wanted advertising has now increased for eight consecutive months.  The net result was that the local unemployment rate fell to 10.2 percent in August from 10.6 percent in July.  As was mentioned in last month’s report, the unemployment rate is typically higher in the summer due to schools being out of session. . . Consumer confidence plunged in August to hit levels not seen since early 2009.  The political battle over the extension of the debt ceiling and the downgrade of the U.S. government debt by Standard and Poor’s, both of which occurred at the beginning of the month, undoubtedly impacted confidence and contributed to a surge in the number of people who think the country is on the wrong track. . . Local stock prices plunged along with the rest of the financial markets as investors grow increasingly concerned about the outlook for the economy.  San Diego stocks were particularly battered, being down 7.22 percent during the month as compared to 4.36 percent for the Dow Jones Industrial Average and 6.42 percent for the NASDAQ Composite Index. . . The national Index of Leading Economic Indicators continues to rise despite all the concerns about the national economy.  The national Index has now increased for four straight months and 13 out of the last 14 months.

August’s decrease puts the USD Index of Leading Economic Indicators for San Diego County at 116.0, down from July’s revised reading of 117.2.  Revised data for building permits, consumer confidence, and the national Index of Leading Economic Indicators led to the revision of the level of the USD Index for July, but there was no revision in the previously reported change of +0.2 percent for the month.  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
2010 AUG 110.0 +0.0%
  SEP 110.0 +0.0%
  OCT 110.0 +0.0%
NOV 110.2 +0.3%
  DEC 110.7 +0.4%
2011 JAN 111.7 +1.0%
  FEB 114.0 +2.0%
  MAR 115.3 +1.2%
  APR 116.4 +1.0%
  MAY 117.2 +0.7%
  JUN 116.9 -0.2%
  JUL 117.2 +0.2%
  AUG 116.0 -1.0%

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