"While there has been encouraging economic news on the employment front, and many economists have signaled that we should expect a post-bad-weather bounce in the spring and summer, the Leading Index for Indiana is still in a funk," said Timothy Slaper, research director of the Indiana Business Research Center in Indiana University's Kelley School of Business, which produces the monthly index.
"The gloom surrounding the home-building market continues to weigh down the index, even as the movement for the index components for manufacturing, transportation and the auto sector were all positive," Slaper said.
The optimism of the rising stock market and robust employment reports hasn’t helped the homebuilders’ outlook.
"Perhaps homebuilders noticed that the U.S. mortgage market index hit its lowest level since December 2000," Slaper said. "Perhaps they still haven’t seen young adults, those who form new households, checking out their model homes. Or perhaps they are concerned about rising mortgage rates that may result from the Fed’s tapering -- no evidence of that yet -- snuffing out demand for new homes.
"All that to say, expectations for growth are uneven across sectors."
The latest from the National Association of Home Builders/Wells Fargo Housing Market Index shows that builder confidence "is stuck somewhere between tepid and ambivalent," he said.
Builder confidence in the market for newly built, single-family homes fell one point to 45 in May from a downwardly revised April reading of 46.
Based on the Institute of Supply Management’s Purchasing Managers Index in April, economic activity in the manufacturing sector expanded for the 11th consecutive month. The April PMI registered 54.9 percent, a 1.2 percentage point increase from March's reading.
The auto component of the LII rose by 0.6 percent. The auto sector continues to do well, with 1.4 million light-vehicle sales in April 2014, an increase of 8.0 percent over April 2013. The April 2014 seasonally adjusted annual rate for light-vehicle sales was 16 million.
Along with the general stock market, the transportation and logistics component of the LII, the Dow Jones Transportation Average, rose 1.3 percent in May.
The interest rate spread was unchanged.
About the Leading Index for Indiana
The Indiana Business Research Center in the Kelley School of Business, with offices on Indiana University's Bloomington and Indianapolis campuses, produces the monthly index. The LII was developed for Hoosier businesses and governments to provide a signal for changes in the general direction of the Indiana economy. In contrast to The Conference Board's Leading Economic Index and other indexes that are national in scope, the LII uses national-level data for key sectors that are important to the Indiana economy. The reason the LII uses national level data is because national data are timelier than state-level data.