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