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September 21, 2022

Little Change in Nebraska’s Leading Economic Indicator

Slow Growth Expected in the First Quarter of 2023
Little Change in Nebraska’s Leading Economic Indicator
Eric Thompson, department chair, K.H. Nelson College Professor of Economics and director of Bureau of Business Research, shared Nebraska’s leading indicator, which remained flat in August.

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Nebraska’s leading economic indicator stayed essentially flat in August, 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 0.01%.

“A steady value for the indicator implies slow economic growth in Nebraska during the first few months of 2023,” said economist 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.

Several components of the leading indicator fell during August, as the Federal Reserve Bank raised interest rates in an effort to lower inflation. First, there was a decline in building permits for single-family homes, on a seasonally adjusted basis.

“Sharply higher interest rates reduce consumer demand and builder confidence in the single-family home market,” said Thompson.

Second, there was an increase in initial claims for unemployment insurance in Nebraska.

“Higher interest rates also should reduce the demand for labor, especially from firms in interest-sensitive industries such as construction and durable goods manufacturing,” according to Thompson.

Despite these challenges, Nebraska business expectations remain positive. Respondents to the August survey reported plans to increase sales and employment over the next six months.

“Business expectations, however, may falter in the coming months as interest rates continue to rise,” 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.