Iowa Leading Indicators Index slips in January

The Iowa Leading Indicators Index (ILII) decreased to 108.4 in January 2023, down .4% from a revised 108.8 in December 2022, according to the Iowa Department of Revenue.

The monthly diffusion index increased to 37.5 in January 2023 from 25.0 in December 2022.

The Iowa nonfarm employment index recorded a .2% increase in January, the 22nd month of growth. Long-term trends in the Leading Indicators Index 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 50.0. The six-month diffusion index has returned to contractionary signals, according to state officials, whereas the six-month annualized change remains below the contractionary threshold for the third month in a row.

Five of the eight component indicators decreased more than .05% over the last half-year: Agricultural futures profits index (AFPI), diesel fuel consumption, national yield spread, new orders index, and residential building permits. The decrease to the six-month diffusion index is from diesel fuel consumption and the AFPI going from positive change to negative change.

Average weekly unemployment insurance claims were the strongest contributor to the ILII in January. Unemployment claims were 25.96% below January 2022 claims, and 47.84% below average historical claims for January, from 1988-2022.

Average weekly unemployment insurance claims, the Iowa Stock Market Index, and average weekly manufacturing hours went from negative contributors to positive contributors to the index. Diesel fuel consumption went from a positive contributor to a negative contributor.

The largest detractor from the index in November 2022 was diesel fuel consumption, revenue officials said. Diesel fuel consumption decreased 12% between January 2022 and January 2023. The 12-month moving average decreased to 67.63 million gallons in January, from 68.24 million gallons in December.

The monthly Iowa Leading Indicators Index report, including the January report, is available on the Department’s website.