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Iowa Leading Indicators Index improves in June after months of larger drops


The Iowa Leading Indicators Index decreased 0.1% to 106.7 in June from 106.7 in May. The figures appear unchanged from month to month because they are rounded to one decimal point.

During the six-month span through June, the index decreased 2.0%, an annualized rate of -3.9%. The six-month diffusion index remained unchanged at 12.5 in June.

A six-month annualized change in the index below -2.0% and a six-month diffusion index below 50.0 are considered a signal of a coming contraction when seen together. The six-month diffusion index remained in contractionary signals for the sixth month in a row whereas the six-month annualized change remained below the contractionary threshold for the eighth month in a row.

The monthly diffusion index increased to 43.8 in June from a revised 12.5 in May. A diffusion index measures the proportion of components rising in a given time period. Components are assigned values based on how they increased or decreased over the time period and the assigned values for all the components are then added together.

The Iowa nonfarm employment coincident index recorded a 0.01% decrease in June, the first month of negative change since March 2021. The Iowa nonfarm employment coincident index is computed using a complex computation based on the Conference Board’s Leading Indicators Index.

Four of the eight components increased month over month in June: The Iowa Stock Market Index, the national yield spread, diesel fuel consumption, average weekly manufacturing hours. Residential building permits, the agricultural futures profit index, the average weekly unemployment claims, and new orders index detracted from the index.

During June, 20 of the 28 Iowa-based or Iowa-concentrated publicly traded companies on the Iowa Stock Market Index companies gained value, and nine of the 10 financial-sector companies increased. With over two-thirds of the stocks experiencing gains, the stock market index increased to 119.54 in June from 115.09 in May.

The yield spread increased in June yet remained in inversion territory (below 0) at -1.67% from -1.74% in May. June is the eighth month in a row that the yield spread has been in inversion. The long-term rate increased 18 basis points while the short-term rate increased 11 basis points.

Diesel fuel consumption increased 1.3% between June 2022 and June 2023. The 12-month moving average increased to 66.86 million gallons in June from 66.79 million in May. The 12-month moving average is the average of an indicator over the last 12 months. Moving averages smooth data to remove noise or seasonality.

The 12-month moving average of average weekly manufacturing hours increased to 39.33 in June from a revised 39.325 in May. In June, average hours were 39.5, above the 39.4 hours in June 2022, yet nearly two hours below the historical monthly average.

The new orders index decreased in June to 51.6 compared with 52.3 in May. The 12-month moving average of the new orders index has decreased to 52.0 from 65.3 in June 2022.

In June, the 12-month moving average of average weekly unemployment claims increased from 1,871 to 1,901. Unemployment claims were 25.7% above June 2022 claims, yet 46.5% below average historical claims for June.

During June, the agricultural futures profit index showed expected profit decreases in both crop commodities and live cattle. Lean hogs was the only commodity with an expected profit increase. Compared with last year, new crop corn prices were 19.7% lower while soybean prices were 16.5% lower. The June crush margin for cattle decreased 1.6% from May while the crush margin for hogs increased 2.4%.

In June, residential building permits were 1,115, down from 1,481 last year. The 12-month moving average decreased to 963 in June from 994 in May. June permits were 3.1% below June 2022, and 7.1% below the monthly historical average.

The full report is available online.

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