Last updateMon, 24 Feb 2020 11pm

Leading Economic Indicators Jumped 0.8% in January

The Conference Board Leading Economic Index for the U.S. increased substantially in January. Positive contributions from most components, except for the ISM New Orders Index and average weekly manufacturing hours, fueled the most recent improvement. In the six-month period ending January 2020, the leading economic index increased 0.1% (about a 0.2% annual rate), much slower than the growth of 0.8% (about a 1.6% annual rate) over the previous six months. However, the strengths among the leading indicators are slightly more widespread than the weaknesses.

U.S. Manufacturing PMI at Six Month Low

Goods producers noted only a slight improvement in operating conditions in February, as signaled by a fall in the IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) from 51.9 to 50.8 midway through the first quarter. The improvement in the health of the manufacturing sector was the slowest since last August.

The lower headline index reading was partially driven by slower expansions in production and new orders. The upturn in output was the softest since last July, with firms stating that weak demand conditions and delays in deliveries following the outbreak of the coronavirus in China had dented production growth.

Bill Would Make Full Expensing Permanent

Sen. Pat Toomey (R-PA) has introduced The ALIGN Act, which makes permanent the full and immediate expensing provision of the 2017 tax reform law. Under the Tax Cuts and Jobs Act, full expensing begins to wind down at the end of 2022.

"Tax reform's most pro-growth feature was allowing businesses to immediately write off purchases of new equipment. It led to workers becoming more productive, which resulted in higher wages and more jobs," says Toomey. "My bill to make full expensing permanent would give manufacturers and businesses of all sizes certainty around investment planning and it would keep our economy humming. I thank my cosponsors for recognizing the economic benefits of full expensing and look forward to getting this measure passed and signed into law."

Consumer Sentiment at Two-Year High

The University of Michigan Consumer Sentiment Index rose to 100.9 in early February to nearly match the expansion peak of 101.4, set two years ago in March 2018. The Expectations Index, the main gauge of future economic conditions, rose to 92.6, also its second highest level in this long expansion. Both measures were still significantly below the levels recorded twenty years ago when the Sentiment Index reached a peak of 112.0 and the Expectations Index peaked at 108.6. The early February gain was not uniform, however. Current personal finances as well as evaluations of the national economy each posted large gains, while consumers' views on buying conditions for household durables posted a significant loss.

Industrial Production, Manufacturing Output Down in January

Industrial production declined 0.3% in January, as unseasonably warm weather held down the output of utilities and Boeing significantly slowed production of civilian aircraft. Manufacturing output decreased 0.1% in January to a level 0.8% below its year-earlier reading. The production of durable goods moved down 0.5% in January, as drops for aerospace and miscellaneous transportation equipment and for machinery were partially offset by a gain for motor vehicles and parts.


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