The Iowa Leading Indicators Index increased to 104.2 in December 2020 from 103.8 in November. With six of the eight components contributing positively, the monthly diffusion index remained unchanged at 62.5 in December from November. This marks the fifth month in a row the monthly diffusion index has registered at or above 50.

December marks the third month in a row since February 2020 that the index has not shown recessionary signals. The Iowa Leading Indicators Index was constructed to signal economic turning points with two key metrics that when seen together are considered a signal of a coming contradiction: a six-month annualized change in the index below minus 2%, and a six-month diffusion index below 50. With the positive improvements in contractionary signals, this report suggests that employment growth will improve over the next three to six months. The six-month diffusion index remained unchanged in December at 62.5, and the annualized six-month index change value was 2.1%.

Six of the eight components added to the Iowa Leading Indicators Index’s monthly increase in December: residential building permits, the Iowa stock market Index, the new orders index, average manufacturing hours, the national yield spread and the agricultural futures profits index. December 2020 residential building permits were 120.4% above December 2019, and 65.5% above the historical average for December.

The yield spread expanded to 0.84% from 0.78% in November.

The agricultural futures showed an increase with corn and soybeans expecting to have profit gains, while profit for livestock commodities are expected to decrease. Compared with last year, new crop corn prices were 9.4% higher and soybean prices were 11.8% higher. The December crush margin for hogs decreased 2.1% from November, while the crush margin for cattle decreased 5.1%.

The full Iowa Leading Indicators Index for December is available online.