Leading Index at Mid-year: Supply Constraints Holding Back Growth

Summary The Leading Economic Index (LEI) came in at just 0.7% in June, a notch short of expectations. The softness is due, in part, to a sharp drop in building permits in June and the third straight monthly drag from the average workweek. Both of these components reflect supply chain problems that are holding back what would otherwise be robust growth.

Leading Index Signals a Moderation in the Pace of GrowthThe Leading Index increased 0.7% in June. While the index continues to indicate expansion, the pace of its growth has moderated, due to slower growth from the index’s positive contributors and further widening between solid demand and struggling supply. Initial jobless claims were once again the largest contributor on the month, adding 0.25 percentage points, as initial claims for unemployment continued to decline. With the labor market recovery slated to continue over the summer, we expect that over the course of the second half of the year, jobless claims will continue to boost the headline. That said, we may not see a boost in July, because the number of weekly initial claims averaged 391K so far in the month, and in the most recent print released this morning for the week of July 16, claims rose to their highest since May. READ FULL ARTICLE>>