The Leading Index for Indiana has posted a slight increase this month, compared to May. The Indiana Business Research Center says gains were reported in each sector used to compile the index. However, IBRC Research Director Tim Slaper says home building “is still in the doldrums.” June 20, 2014

News ReleaseBLOOMINGTON, Ind. — The Indiana University Kelley School of Business' Leading Index for Indiana rose over the last month, contributing to the generally upbeat economic news.

The LII rose from 101 in May to 101.1 this month. All four points used to generate the LII — home building, the auto sector, and the broad-based manufacturing and transportation sectors — reported gains.

“That said, home building is still in the doldrums. Like the ice on the Great Lakes that only recently melted, home builders’ outlook still reflects the winter cold,” said Timothy Slaper, research director of the Indiana Business Research Center in the Kelley School, which produces the monthly index.

“Most economists and market watchers are expecting spring and summer economic bounce-back from winter’s (the first quarter of 2014) chilling effects on gross domestic product,” Slaper added.

The National Association of Home Builders/Wells Fargo Housing Market Index reported that builder confidence rose last month, but is still below what is considered good for building conditions.

Builders are still encountering obstacles, including the limited availability of labor. Household formation is still below the long-term trend.

“Young, first-time homebuyers still haven’t shown up. In general, consumers are hesitant and want to make sure that the economy is in full-recovery mode before making a home purchase. As a result, builders are moving cautiously in adding inventory,” Slaper said.

Based on the Institute for Supply Management’s Purchasing Manager’s Index, last month’s economic activity in the manufacturing sector expanded for the twelfth consecutive month, an increase of 0.5 percentage points from April's reading of 54.9 percent.

The Production Index registered 61.0 percent, 5.3 percentage points above the April reading of 55.7 percent. Comments from the PMI survey panel “reflect generally steady growth, but note some areas of concern regarding raw materials pricing and supply tightness and shortages.”

The auto component of the LII rose by 0.5 percent from last month. In contrast to housing, the auto sector has been performing well. There were 1.6 million light-vehicle sales in May — an increase of 15.8 percent from April and an increase of 11.2 percent over May 2013.

The May 2014 seasonally adjusted annual rate for light-vehicle sales was 16.7 million. The last time the monthly SAAR value reached 16.7 million was in February 2007.

The transportation and logistics component of the LII, the Dow Jones Transportation Average, really gained some traction, rising over 5 percent last month. The interest rate spread changed very little.

About the Leading Index for Indiana

The Indiana Business Research Center in the Kelley School of Business, with offices on Indiana University's Bloomington and Indianapolis campuses, produces the monthly index. The LII was developed for Hoosier businesses and governments to provide a signal for changes in the general direction of the Indiana economy. In contrast to The Conference Board's Leading Economic Index and other indexes that are national in scope, the LII uses national-level data for key sectors that are important to the Indiana economy. The reason the LII uses national level data is because national data are timelier than state-level data.

Source: Indiana University

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