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The Iowa Leading Indicators Index (ILII) decreased to 107.3 in April 2019 from 107.5 in March
(100=1999), a decrease of 0.1 percent. This is a return to negative change after a 0.1 percent increase in March, breaking the previous five month streak of observed unchanged values or declines. With only two of the eight components contributing positively, the monthly diffusion index was 25.0 in April, down from 43.8 in March.
The annualized six-month change remained at -1.7 percent in April for the fourth month in a row, close to the -2.0 percent threshold that signals a downturn. The April six-month diffusion index was 25.0, also for the fourth month in a row. Only two of the eight indicators (diesel fuel consumption and agricultural futures profits index) experienced an increase of greater than 0.05 percent over the last half-year.
With a 0.05 percent increase in April, Iowa’s non-farm employment index has experienced
eighteen consecutive months of positive growth, although the last three months have averaged the slowest growth since 2017. The negative annualized six-month ILII value and the six-month diffusion index at 25.0 have persisted for four months suggesting the broad-based signals of weakness in the Iowa economy continue. The goal of the ILII is to signal turning points in the Iowa economy as measured by employment. This report suggests that over the next 3 to 6 months, employment growth will remain weak and possibly stall.
Six of the eight components were negative contributors to the ILII in April. These include, in the order from largest negative contributor to smallest, residential building permits, the new orders index, average weekly unemployment claims (inverted), average manufacturing hours, the Iowa stock market index, and the national yield spread.
April 2019 residential building permits were 22.72 percent below April 2018 (1,000 vs 1,294) and 17.9 percent below the historical average for April (1998-2018). The 12-month moving average of residential building permits decreased to 877 in April from 901 in March. April marks the fifth month in a row that the 12-month moving average fell below 1,000 permits. Declines in permits were concentrated in structures with 5 units or more down from 443 in April 2018 to only 24 in April 2019.
The April 2019 monthly value of the new orders index decreased to 56.4 from 61.2 in March and was lower than the April 2018 value of 69.0. With the year-over-year decrease, the 12-month moving average of the new orders index decreased to 58.7 from 59.8. The index remained at or above 50.0 for the twenty-ninth month, suggesting continued growth in manufacturing.
The 12-month moving average of weekly unemployment insurance claims increased to 2,644 in April from 2,608 in March, where changes are inverted when considered in the ILII. Average monthly claims were up 25.9 percent from last April, yet 25.1 percent below the monthly historical average (1987-2018). For the last two years, the 12-month moving average of Iowa weekly unemployment insurance claims has been below 3,000, a threshold not crossed during the previous 11 years. The BLS reported that the Iowa unemployment rate (a coincident indicator) remained at an all-time record low of 2.4 percent in April. The state’s jobless rate was 2.6 percent one year ago. The U.S. unemployment rate dropped to 3.6 percent in April. The Iowa labor force participation rate registered at 69.1 percent, 0.6 percent higher than one year ago.
The 12-month moving average of manufacturing hours decreased to 41.58 in April from 41.63 in March. April 2019 average hours were 41.3, over a half hour below the 41.9 hours in April 2018, but above the historical monthly average of 41.0 (1996-2018).
In April, the Iowa stock market index experienced gains in 19 of the 33 stocks, with 5 of the 12 financial-sector company stocks experiencing gains. Despite gains in over half the stocks in the index, losses experienced by Wells Fargo Financial pushed the index down to 104.17 in April from a revised 104.71 in March. The revisions to the Iowa stock market index are due to the spin-off of Dow from DowDuPont that occurred in April but impacted the reported historical share prices of the remaining company. Note that the last spin-off of the agricultural business, to be known as Corteva, is scheduled for June 1.
The national yield spread decreased to 0.10 percent as the long-term rate decreased 4 basis points while the short-term rate increased 2 basis points. This marks the ninth month in the last twelve months that the national yield spread decreased. The decrease in the long-term interest rate suggests weakening expectations for long-term national economic growth. The short-term rate remains in the target range of the federal funds rate that was last increased in December.
The agricultural futures profits index (AFPI) and diesel fuel consumption were the two
components that contributed positively to the index. The AFPI was a positive contributor to the ILII for the seventh time in the past twelve months. In April, the AFPI experienced drops in expected profits for the two crop commodities and cattle but gains in expected profits for hogs. Compared to last year, new crop soybean prices were 11.9 percent lower while corn prices were 5.9 percent lower. The April crush margin for hogs was up 25.4 percent while the crush margin for cattle was down 5.7 percent from March.
Taxable diesel gallons were 59.56 million gallons in April 2019, 0.2 percent higher than the 59.41 million gallons recorded for April 2018. The 12-month moving average of diesel fuel consumption increased to 62.28 million gallons in April from 62.26 million in March. Diesel fuel consumption, a measure of semi-truck traffic within and across Iowa, was a positive contributor for the tenth time in twelve months.
The monthly Iowa Leading Indicators Index report is available on the Department's website. Please contact Amy Harris at (515) 281-0196 or Amy.Harris@iowa.gov if you have any questions about the report.
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