Leading Indicators Down in October

December 10, 1998--The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 0.5 percent in October. Once again, a sharp decrease in local stock prices was the main contributor to the decline. But there were also moderate smaller drops in consumer confidence and help wanted advertising. Improvement in initial claims for unemployment insurance was the biggest positive for the Index, followed by smaller gains for building permits 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	- 0.5 %
	Building Permits  Residential units authorized by building permits in San Diego County (October)  Source: Construction Industry Research Board	+0.08%
	Unemployment Insurance  Initial claims for unemployment insurance in San Diego County, inverted (October)  Source: Employment Development Department	+0.50%
	Stock Prices  San Diego Stock Exchange Index (October)  Source: San Diego Daily Transcript	-2.47%
	Consumer Confidence  An index of consumer confidence in San Diego County (October)  Source: San Diego Union-Tribune	-0.51%
	Help Wanted Advertising  An index of help wanted advertising in the San Diego Union-Tribune (October)  Source: Greater San Diego Chamber of Commerce	- 0.71%
	National Economy  Index of Leading Economic Indicators (October)  Source: The Conference Board	+ 0.16%

After increasing for 41 months in a row, the Index has now declined for two consecutive months. While some have dismissed September’s decline as being overly affected by the decline in local stock prices, an analysis of October’s results shows a more serious problem. Local stock prices fell once again, but the downturns in consumer confidence and help wanted advertising also seem to be accelerating. In fact, the declines in the latter two components by themselves would have outweighed the three positive elements of the Index. So the drop in October has a stronger foundation than the one in September, which is not an encouraging sign.

So what does this portend about the future of the local economy? As was indicated in last month’s report, economists usually look for three consecutive monthly changes in a leading index as a signal of a change in direction for an economy. The local Index has only dropped for two months, but the strength and depth of October’s decline indicates that a slowdown in the San Diego economy may be in the near future. There may already be some manifestations of that slowdown, as housing sales are down and local retail spending is lagging behind national figures this Christmas season. The local economy should have enough strength and momentum to carry it through the first half of 1999, but the outlook for the second half is cloudy at this point.

October's increase puts the Index of Leading Economic Indicators for San Diego County at 142.5, down from September’s reading of 143.3. There was no revision of the previously reported change of -0.4% for the month. The fluctuations of the Index of Leading Economic Indicators for San Diego County for the last year are given below:

		Index	Change
1997	OCT	139.0	+1.2%
	NOV	140.6	+0.7%
	DEC	141.4	+0.6%
1998	JAN	142.0	+0.4%
	FEB	142.6	+0.4%
	MAR	142.8	+0.1%
	APR	142.9	+0.1%
	MAY	143.1	+0.1%
	JUN	143.2	+0.1%
	JUL	143.5	+0.2%
	AUG	143.8	+0.7%
	SEP	143.3	-0.4%
	OCT	142.5	-0.5%

For more information on the University of San Diego's Index of Leading Economic Indicators, please contact:

The Index of Leading Economic Indicators is published by USD’s Real Estate Institute (REI). For more information about the REI, please contact Mark Riedy at (619) 260-4872.