Latest Leading Economic Indicators

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest leading economic indicators.

• The leading economic indicators are pointing to continued expansion in the economy. In July, the indicator index rose 0.6 percent and the pace of increases over recent months appears to be accelerating. This is good news for GDP growth and job growth prospects.
• Though there was a slight pullback in consumer sentiment and weekly average work hours, the rise in new durable goods orders, housing permits, and the stock market (in July) more than made up for the broad index to point to better economic times ahead. Moreover, the spread between short-term and long-term interest rates are widening, which generally has been a better economic outlook. These measurements are reasonably consistent with NAR’s projection of 2 million net new jobs this year and a slightly higher number next year. More jobs are needed for higher home sales in a rising interest rate environment.
• The leading economic indicators for China have been rising a bit faster, 1.4 percent in July. The Chinese economy will therefore likely move a bit faster than the U.S. economy.
• Though the leading indicators are good for a short-term outlook of 12 to 18 months, they are clueless about the longer-term forecast.
• China, for example, had been growing fast but will undoubtedly slow as copy-cat technological improvements dry out. Moreover, China faces a long-term problem that will be very hard to overcome. It is a culture of favoring sons over daughters. A highly distorted sex ratio at birth in the past decade will result in about 30 million more young men in their twenties than young women of the same age in a few years.  Are social unrest and fighting on the horizon in China?
• The tragic story of Anne Boleyn is a good illustration of why you should not discount daughters. King Henry VIII fell madly in love with Anne while he was married to another woman. After a complicated separation of England from the Catholic Church, the King later lawfully married Anne. But when she couldn't produce a male  heir, the King had Anne on the chopping block (and subsequently re-married four more times). Anne, however, did leave behind one important legacy: her daughter Elizabeth. The Virgin Queen, as Elizabeth eventually found a way to the throne, set the conditions for Britain to rule the waves over the next 300 years and oversaw an empire where the sun never set. Never underestimate a daughter’s potential for greatness.