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August 24, 2022

Slow Economic Growth Predicted by Nebraska’s Leading Economic Indicator

Increase in U.S. Dollar Value Creates Challenges
August 22, 2022: Slow Economic Growth Predicted by Nebraska’s Leading Economic Indicator
The University of Nebraska–Lincoln’s leading economic indicator (LEI) predicted slower growth for the rest of 2022. Eric Thompson, director of the Bureau of Business Research, K.H. Nelson Professor of Economics and chair of the Department of Economics, developed the LEI, based on six components – business expectations, building permits for single-family homes, airline passenger counts, initial claims for unemployment insurance, the value of the U.S. dollar and manufacturing hours worked.

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Nebraska’s leading economic indicator fell slightly in July, according to the most recent report from the University of Nebraska–Lincoln. Designed to predict economic activity six months into the future, the leading indicator fell by 0.08%.

“The July decrease suggests slow economic growth in Nebraska for the rest of year and the beginning of 2023,” said economist Dr. Eric Thompson, department chair, K.H. Nelson College Professor of Economics and director of Bureau of Business Research.

The six components of Nebraska’s Leading Economic Indicator include business expectations, building permits for single-family homes, airline passenger counts, initial claims for unemployment insurance, the value of the U.S. dollar and manufacturing hours worked.

The leading indicator fell for two primary reasons. First, there was an increase in the value of the U.S. dollar in July.

“An increase in the value of the dollar creates challenges for businesses such as agriculture and manufacturing, which compete in international markets,” said Thompson.

Second, there was a decline in airline passenger counts. “The drop in airline passenger travel is likely a response to a sharp increase in ticket prices,” according to Thompson.

Despite these challenges, Nebraska businesses remain confident about the future. Respondents to the July Survey of Nebraska Business reported plans to increase sales and employment over the next six months.

“The small businesses which respond to the Survey of Nebraska Business continue to see opportunities to expand, despite rising interest rates and other challenges facing the Nebraska economy,” said Thompson.

The full report and a technical report describing the indicators are available at the Bureau of Business Research website, https://bbr.unl.edu.