The Iowa Leading Indicators Index (ILII) decreased to 105.6 in October, down .4% from a revised 106.0 in September, according to the monthly report from the Iowa Department of Revenue.
The monthly diffusion index, which measures the breadth of employment change, also decreased in October to 25.0, down from 37.5 in September.
The Iowa nonfarm employment coincident index recorded a .01% increase in October. Long-term Iowa Leading Indicators Index trends as of October suggest that nonfarm employment will decrease over the next three to six months, according to the Department of Revenue report.
The ILII was created 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 50.0.
The six-month diffusion index remained a contractionary signal for the tenth month in a row, and the six-month annualized change showed contraction for the twelfth month in a row. Six of the eight component indicators decreased more than 0.05 percent over the last six months, the agricultural futures profits index (AFPI), diesel fuel consumption, the Iowa stock market index, new orders index, residential building permits, and initial unemployment insurance claims.
Average manufacturing hours and the national yield spread were the only components to increase by more than 0.05 percent over the last six months.
The national yield spread was the strongest positive contributor to the ILII in October. During October, the yield spread increased, yet remained in inversion territory (below 0) at -0.8%, from -1.18% in September. October is the twelfth month in a row that the yield spread has been in inversion. The long-term rate increased 42 basis points, while the short-term rate increased by 4 basis points.
The New Orders Index went from a positive contributor in September to a negative detractor to the Index in October.
The largest detractor from the index in October was the AFPI. During October, expected profits decreased in both crop commodities and hogs. Cattle experienced expected profit increases. Compared to last year, new crop corn prices were 28.8% lower, while soybean prices were 7% lower. The October crush margin for hogs decreased 9% from September, while the crush margin for cattle increased 8%.
