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Iowa Leading Indicators Index reports slight rise in July


The Iowa Leading Indicators Index rose 0.2% to 109.1 in July, from 108.9 in June. July marks the 12th month out of the last 13 where the index has increased. The monthly diffusion index remained the same from June to July, at 50. The monthly diffusion index has registered at or above 50 for every month in the last year.

The Iowa nonfarm employment coincident index recorded a 0.29% increase in July, the fourth month of increase since February 2020.The six-month diffusion index remained unchanged for the fifth month in a row, at 87.5 in July.

The report suggests employment growth will improve in the next three to six months, and indicators point to a “robust economic turnaround.” It also shows momentum may be slowing, as it showed in June, because the index’s pace of gains has decreased since peaking in March and April.

Four of the eight component indicators increased in July: the agricultural futures profit index, average weekly unemployment claims (inverted), diesel fuel consumption, and the new orders index. Residential building permits, the national yield spread, average manufacturing hours, and the Iowa Stock Market Index are the four components that detracted from the index.

Seven of the eight components increased more than 0.05% in the last six months, with only average manufacturing hours excluded.

The 12-month moving average of manufacturing hours decreased slightly to 39.9 in July 2021 from a revised 40.0 in June 2021. July 2021 average hours were 39.5, below the 40.5 hours in July 2020, and more than an hour and a half below the historical monthly average.

The 12-month moving average of weekly unemployment insurance claims decreased to 4,886 in July from 5,413 in June. Average monthly claims have declined 77.3% from last July 2020, and are 45% below the monthly historical average.

The July 2021 monthly value of the new orders index increased to 77.2 from 74.1 in June, and was substantially higher than the July 2020 value of 66.4. The 12-month moving average of the new orders index increased to 76.4 from 75.5.

The agricultural futures profit index showed an increase in July, with both grain and livestock commodities expecting profit gains. Compared with 2020, new crop corn prices were 61.9% higher while soybean prices were 52.4% higher. The July crush margin for hogs increased 4.1% from June while the crush margin for cattle increased 4%.

In July, the yield spread contracted to 1.48% from 1.60% in June. The long-term rate decreased 20 basis points while the short-term rate increased 1 basis point. The yield spread has now contracted three times in a row, signaling a possible “weakening confidence in financial markets for long-term economic growth.” according to the report.

Of the 30 companies in the Iowa Stock Market Index, 22 lost value in July, including all of the 11 financial-sector companies. The index decreased to 125.29 in July from a revised 127.72 in June as more than one-third of the stocks experienced loss.

Diesel fuel consumption was 69.7 million gallons in July, 7.6% higher than the 64.8 million gallons recorded for July 2020. The 12-month moving average of diesel fuel consumption increased to 65.7 million gallons in July from 65.3 million in June 2021.

The full report is available online

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