LEI Ends Downward Trend; Philly Fed’s Index Falls

Two economic reports issued Thursday offered different conclusions about the effectiveness of the recent interest rate cuts by the Federal Reserve.

The Conference Board said its Index of Leading Economic Indicators rose 0.1% to 108.7 in April after slipping 0.2% in each of the previous two months.

This report, which suggests that the U.S. economy is starting to recover, is important for trucking companies because it is a key gauge of future economic activity.

Also Thursday, the Philadelphia Federal Reserve Bank’s general economic index fell to minus 8.8 this month from minus 7.2 in April.

The report, which tracks manufacturing in eastern Pennsylvania, southern New Jersey and Delaware, showed a decline in production for the first time since January. There was no improvement in the demand for manufactured goods, and a further reduction in employment and work hours.

This is an important report for both investors and trucking companies because manufacturing accounts for about 20% of U.S. economic production and is one of trucking’s largest and most important customer segments.

Meanwhile, the Labor Department reported Thursday that initial applications for jobless benefits fell by 8,000 to a seasonally adjusted 380,000 for the week ended May 12.

The four-week moving average also fell for the second consecutive week to 401,250 from 403,500. Reuters noted economists consider this average a more reliable indicator of job market trends because it irons out weekly fluctuations.

Although the Philadelphia Fed said it still expects growth to pick up over the next six months, April’s report suggests that five interest rate cuts by the Federal Reserve this year have yet to have a major impact. Several analysts told Bloomberg the report is a sign the economic recovery may take longer than expected.

However, the Conference Board’s index does seem to contradict these analysts because its improvement reflects the positive effect of the recent rate cuts, according to Bloomberg.

Three consecutive declines in the index traditionally have been considered a sign that the economy is headed into recession, so many analysts took even this slight rise a positive sign, the Associated Press reported.

The Conference Board said the increase was a direct result of money supply growth, interest rate spread and rising stock prices.

However, vendor performance, initial claims for unemployment insurance, building permits, the index of consumer expectations and manufacturers’ new orders for nondefense capital goods all negatively impacted the index.

Average weekly manufacturing hours and manufactures’ new orders for consumer goods were unchanged for the month of April.

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