Iowa Leading Indicators Index slips in December

Drought impact on grain prices continues

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The two most negative contributors to the Iowa Leading Indicators Index†in November were the two most positive in December. But the index overall still slipped to 105.9 from 106 in November.

The Iowa Department of Revenue said the most positive contributor to the economic index†in December was the Iowa stock market index after being the largest negative contributor in November. Of the 34 stocks included in the index, 28 had positive gains in the month of December, including 10 of the 11 financial-sector companies.

Diesel fuel consumption was the second most positive contributor, increasing 3.0 percent from its level last December.

The other two positive contributors in December were unemployment insurance claims and the national yield spread.

Unemployment insurance claims declined again in December after the only increase in 36 months occurred in October. Claims were 1.2 percent below the number of claims made in December 2011, and were only 1.5 percent above the historical average for December claims.

The national yield spread also contributed positively due to the long-term interest rate, rising to 1.72 percent in December, and the short-term rate falling to 0.07 percent, widening the yield spread to 1.65.

For the first time in six months, the number of residential building permits issued was a negative contributor. The 12-month moving average for building permits decreased to 823 in December from 826 the previous month.

The most negative contributor to the Leading Indicators Index† in December was manufacturing hours, with†the 12-month moving average†declining to†40.65 hours from 40.74 hours in November 2012. The average number of production†hours reported for the month of December was over a full hour below the 41.9 hours reported in December 2011.

The new orders index experienced an increase for the first time in six months, rising†slightly to 54.9 from 53.5 in November. Despite the increase, the index value fell short of 65.3 recorded a year ago, contributing negatively to the Leading Indicators Index†for the second consecutive month.

The agricultural futures profits index remained a negative contributor in December for the 12th consecutive month.

The impact of the national drought on grain prices continued to be seen in December. The average futures corn price in December is 18.1 percent above the price seen in December 2011.

The futures price of soybeans was 15.9 percent above last Decemberís price.

Although both cattle and hog prices remain at near record highs, profits are being squeezed as the higher grain prices boost feed costs.

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