|Indiana Leading Economic Index|
Indiana’s economy is so heavily automobile dependent, big drops in unfilled orders for motor vehicles and parts lead to big drops in automotive manufacturing activity. Declines in this data series have led the past two recessions by six months and ten months, respectively. figure shows how the decline in unfilled orders of motor vehicles and parts predates downturns in Indiana (boxes outlined in blue). The graph also shows the desired behavior of the indicators that compose a leading index.
The Dow Jones Transportation Index tracks twenty transportation and logistics companies. Indiana, as the crossroads of America, has a relatively large transportation and logistics sector. Since stock prices tend to be forward looking, it stands to reason that it would be a component in Indiana’s leading index.
The Housing Market Index (HMI) is published monthly and uses surveys of home builders to gauge the level of confidence in the real estate and construction industry. Since 1990, the HMI has led Indiana construction employment movements by roughly six months.
The interest rate spread measures the extent to which investors anticipate a recession in the near future. The spread, the yield on ten-year Treasury bonds minus the Federal Funds Rate, has become negative before all recessions since 1970..