Leading Economic Indicators Up in July

Note: The tentative release date for next month's report is September 27.

August 30, 2011 -- The USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Indicators for San Diego County rose 0.2 percent in July.  Leading the way to the upside were strong gains in help wanted advertising and the outlook for the local economy.  Local stock prices were also up moderately.  These outweighed a sharp drop in consumer confidence and smaller declines in building permits and initial claims for unemployment insurance to push the USD Index to its eighth gain in nine months.   

Index of Leading Economic Indicators 
The index for San Diego County that includes the components listed below (July
Source: USD
 Burnham-Moores Center for Real Estate
+ 0.2 % 
Building Permits 
Residential units authorized by building permits in San Diego County (July)
Source: Construction Industry Research Board
- 0.35% 
Unemployment Insurance 
Initial claims for unemployment insurance in San Diego County, inverted (July

Source: Employment Development Department 
- 0.22% 
Stock Prices 
San Diego Stock Exchange Index (July) 
Source: San Diego Daily Transcript 
+ 0.59%
Consumer Confidence 
An index of consumer confidence in San Diego County, estimated  (July)
Source: The Conference Board
- 1.19% 

Help Wanted Advertising 
An index of online help wanted advertising in San Diego (July) 
Source: Monster Worldwide
+ 1.13% 
National Economy 
Index of Leading Economic Indicators (July)
Source: The Conference Board 
+ 1.01% 

There was some concern when last month’s report showed the first drop in the USD Index in 27 months.  While the gain in July reduced some of those concerns, there are still some worries about the possibility of a double dip recession, both locally and at the national level.  The probability of a recession is probably less than 50 percent, but the probability is significant and is growing.  A drop in consumer confidence and the lack of income due to high unemployment has adversely affected personal consumption expenditures, which is about 70 percent of economy activity.   That, combined with a drop in government expenditures as all levels of government cut back to deal with deficits, has caused the Gross Domestic Product (GDP) to slow to a crawl.  Add to that a weak housing and real estate market, increased inflation, and political turmoil over fiscal policy and the ingredients for a downturn are there.  Whether this is enough or whether a further triggering mechanism is needed remains to be seen.

Highlights:  The trend in residential units authorized by building permits was negative for the second straight month.  A moving average is used to determine the trend by smoothing the month-to-month fluctuations in volatile components such as residential units authorized. . . The labor market variables remain mixed, with initial claims for unemployment insurance negative for the second month in a row, while help wanted advertising was up for the seventh straight month.  The latter move put online help wanted advertising at its highest level since November 2008.  The net result was that the local unemployment rate rose to 10.5 percent in July from 10.4 percent in June.  The increase in the unemployment rate is not as negative as it seems since July is usually the highest month of the year in terms of the unemployment rate, as students and others involved in education entered the labor force looking for summer jobs. . . Consumer confidence continues to plummet as the drumbeat of bad news about the economy takes its toll.  Particularly impacted are purchases of big ticket items such as automobiles, furniture, housing, etc., as consumers tend to be more hesitant to take on debt when they are worried about their jobs and income. . . Although the stock market has been very volatile (mostly to the downside) in August, local stock prices registered a solid gain in July. . . Despite all the bad economic news and worries about a double dip recession, the national Index of Leading Economic Indicators continues to move upward.  One negative item was the second estimate of GDP growth for the second quarter of 2011, which showed the national economy growing at an anemic 1.0 percent annual rate.  This was down from the advance estimate for the quarter, but was still higher than the even more anemic growth rate of 0.4 percent for the first quarter.

July’s increase puts the USD Index of Leading Economic Indicators for San Diego County at 117.1, up from June’s revised reading of 116.9.  Revised data for building permits, local stock prices, and consumer confidence led to the revision of the level of the USD Index for June, 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 JUL 110.0 +0.3%
  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 117.1 +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