Little change in Nebraska’s leading economic indicator

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Little change in Nebraska’s leading economic indicator

Slow growth expected in first quarter of 2023
Inside of house being constructed, with frame and exterior walls completed

Nebraska’s leading economic indicator stayed essentially flat in August, according to the most recent report from the University of Nebraska–Lincoln. The leading indicator, designed to predict economic activity six months into the future, fell 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, director of the Bureau of Business Research and K.H. Nelson Professor of Economics.

The six components of Nebraska’s leading economic indicator are 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,” Thompson said.

Nebraska Bureau of Business Research Leading Economic Indicator – September 2022
Video: Eric Thompson discusses the August leadin economic indicator report

There was also 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,” Thompson said.

Despite these challenges, Nebraska business expectations remain positive. Respondents to the August Survey of Nebraska Business 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,” Thompson said.

Read the full report and a technical report describing the indicators.

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