Iowa Leading Indicators Index decreased slightly in February

Iowa Leading Indicators Department of Revenue
The Iowa Department of Revenue building in Des Moines. CREDIT IOWA DEPARTMENT OF REVENUE

The Iowa Leading Indicators Index (ILII) decreased to 108.3 in February, a decline of .1% from 108.4 in January, according to a report from the Iowa Department of Revenue.

The monthly diffusion index increased to 43.8 in February from 37.5 in January, according to the report.

The Iowa nonfarm employment coincident index recorded a .12% increase in February, the twenty-third month of growth. Iowa Department of Revenue officials said in a release that long-term trends in the ILII suggest that nonfarm employment will decrease 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 economic contraction: a six-month annualized change in the index below -2% and a six-month diffusion index below 50.

The six-month diffusion index remains in contractionary signals for the second month in a row, whereas the six-month annualized change remains below the contractionary threshold for the fourth month in a row. Five of the eight component indicators decreased more than 0.05 percent over the last half-year: Agricultural futures profits index (AFPI), diesel fuel consumption, national yield spread, new orders index, and residential building permits.

National yield spread was the strongest contributor to the ILII in February. The yield spread improved but remained in inversion territory (below 0) at -1.04% from -1.16% in January. February is the fourth month in a row that the yield spread has been in inversion. The long-term rate increased 22 basis points, while the short-term rate increased 10 basis points.

The national yield spread and residential building permits went from negative contributors to positive contributors to the Index. Average weekly unemployment insurance claims (inverted) went from a positive contributor to a negative contributor to the Index.

The largest detractor from the index in February was the agricultural futures profits index. During February, this component expected profits decreases in both crop commodities and livestock commodities. Compared to last year, new crop corn prices were .2% higher while soybean prices were 4% lower. The February crush margin for cattle remained steady from January, while the crush margin for hogs decreased 3.1 percent.