Electrical Marketing’s Leading Economic Indicators - January 2019

Economists on AIA panel see gains in 2019 but a slowdown in 2020. Nonresidential construction spending on buildings is projected to grow by +4.4% through 2019, according to a new consensus forecast from The American Institute of Architects (AIA), Washington, DC. Healthy gains in the industrial and institutional building sectors have bolstered growth projections for 2019, but the AIA Consensus Construction Forecast Panel  consisting of leading economic forecasters is suggesting that a broader economic downturn may be materializing over the next 12 to 24 months.

“Though the economy has been performing very well recently, trends in business confidence scores are red flags that suggest a slowdown is likely for 2020,” said AIA Chief Economist Kermit Baker. “These signals may be temporary responses to negative short-term conditions, but historically they have preceded a more widespread downturn.”

PMI suffers from -5.2% December decline. December’s Purchasing Managers Index (PMI) registered 54.1%, a decrease of 5.2 percentage points from the November reading of 59.3%. The PMI is a survey of industrial purchasing managers published monthly by the Institute for Supply Management’s (ISM) Manufacturing Business Survey Committee. The New Orders Index registered 51.1%, a decrease of 11 percentage points from the November reading of 62.1%.

Leading indicators starting to slow down. The Conference Board’s Leading Economic Index (LEI) for the U.S. increased 0.2% in November to 111.8 (2016 = 100), following a -0.3% decline in October, and a +0.6% increase in September.

“The LEI increased slightly in November, but its overall pace of improvement has slowed in the last two months,” said Ataman Ozyildirim, director of economic research at The Conference Board. “Despite the recent volatility in stock prices, the strengths among the leading indicators have been widespread. Solid GDP growth at about 2.8% should continue in early 2019, but the LEI suggests the economy is likely to moderate further in the second half of 2019.”