Monday, October 13, 2014

Current Conditions Index: August 2014

This is an abbreviated version of the August Current Conditions Index report. The complete report, which includes tables, along with past reports, can be found on my website: .


August will turn out to be the most significant month thus far in 2014 for two reasons. First, in August, Rhode Island was able to sustain the improved momentum we witnessed in July, as the Current Conditions Index matched its July value of 75, which had been its highest thus far in 2014. Second, and most importantly, August brought with it the one “signal” we were sorely in need of this year: after a string of twelve consecutive months where the CCI had failed to beat its year-earlier values, at long last, the CCI for August of this year exceeded its value from last August. So, the major negative related to consecutive disappointments in our state’s economic performance relative to a year ago has ended at twelve. The implication of both of these factors is critical: we appear to have transitioned from a period where the current recovery was becoming less broadly based into one where economic momentum is increasing. That, as the saying goes, is a big deal!

Along with this good news it is important to keep in mind the central role that our goods-producing sector has played: both housing and manufacturing have continued to move well beyond their cyclical troughs, helping us to sustain our fluctuating cyclical momentum. So, as Rhode Island moves farther into the second half of 2014, our state’s economic performance might not have decoupled from the accelerating national economy after all. Stay tuned!

In August, four of the five leading indicators contained within the Current Conditions Index improved. The one leading indicator that failed to improve, Single-Unit Permits, which reflects new home construction, had previously turned in a string of strong performances. This volatile indicator declined by 8.6 percent in August relative to its value last year.

Total Manufacturing Hours, which measures strength in our manufacturing sector, rose once again in August (+1.1%), but August growth was substantially slower than it was in July, as manufacturing employment rose but the length of the workweek fell slightly. As has been true for some time now, the Manufacturing Wage declined, for a sixth consecutive time in August, by a difficult to believe 4.6 percent.

New Claims, which is a leading labor market indicator, fell at a double-digit rate (-20.5%) for the second consecutive month, raising the likelihood that this indicator will resume a downward trend. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, rose for the second time since last November (+2.2%), growing at almost twice the July rate.  Finally, US Consumer Sentiment rose in August (+0.2%), ending a string of three consecutive declines.

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