The Iowa Leading Indicators Index (ILII) increased to 107.0 in February from 106.7 in January, a slight increase of .3%, according to the latest report from the Iowa Department of Revenue.
The monthly diffusion index remained unchanged at 62.5 from January. The Iowa nonfarm employment coincident index recorded a .05% decrease in February. Revisions to the nonfarm employment index did result in the nonfarm employment index decreasing in September 2024 through December 2024 for the first time since March 2021. Long term trends in the ILII suggest that nonfarm employment will increase over the next three to six months.
The ILII was constructed to signal economic turning points with two key metrics that when seen together are considered a signal of a coming contraction: a six-month annualized change in the index below -2.0% and a six-month diffusion index below 50.
Five of the eight component indicators increased more than .05% over the last half-year: average manufacturing hours, diesel fuel consumption, the Iowa Stock Market index, the national yield spread, and residential building permits. The agricultural futures profits index (AFPI) and initial unemployment insurance claims were the components to decrease by more than .05% over the last six months.
Diesel fuel consumption was the strongest positive contributor to the ILII in February. Diesel fuel consumption increased 16.6% between February 2024 and February 2025. The 12-month moving average increased to 65.99 million gallons in February 2025 from 65.18 million in January 2025.
Initial unemployment insurance claims (inverted) and the national yield spread went from contributors in January to detractors in February. Diesel fuel consumption and the AFPI went from detractors in January to contributors in February.
The national yield spread was the strongest detractor to the ILII in February 2025. During February, the yield spread was positive, yet down from .29% in January to 0.12. February was the second month in a row after 26 months in a row that the yield spread was positive. The long-term rate decreased 18 basis points while the short-term rate decreased by 1 basis point.
