The Iowa Leading Indicators Index (ILII) decreased to 106.0 (100=1999) in September (-0.3%) from a revised 106.3 in August, according to a news release from the Iowa Department of Revenue. The monthly diffusion index increased to 37.5 in September from 31.3 in August. The Iowa nonfarm employment coincident index recorded a 0.07% increase in September. 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 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 in contractionary signals for the ninth month in a row whereas the six-month annualized change remained below the contractionary threshold for the 11th month in a row.
Six of the eight component indicators decreased more than 0.05% over the last half-year: the agricultural futures profits index, diesel fuel consumption, the Iowa stock market index, new orders index, residential building permits, and initial unemployment insurance claims.
Average manufacturing hours was the only component to increase by more than 0.05% over the last six months while national yield spread increased by more than 0.00% but less than 0.05% over the last six months.
- The national yield spread was the strongest positive contributor to the ILII in September. During September, the yield spread increased yet remained in inversion territory (below 0) at -1.18% from -1.39% in August. September is the 11th month in a row that the yield spread has been in inversion. The long-term rate increased 21 basis points while the short-term rate remained unchanged.
- Diesel fuel consumption went from a positive contributor in August to a negative detractor in September. New Orders Index went from a negative detractor in August to a positive contributor to the Index in September.
- The largest detractor from the index in September was diesel fuel consumption. Diesel fuel consumption decreased 13.0% between September 2022 and September 2023. The 12-month moving average decreased to 65.92 million gallons in September from 66.67 million in August.
To view the Iowa Leading Indicators Index report, visit the Iowa Department of Revenue website.
