Leading index for Kansas economy improves

An indicator of future economic growth in Kansas has improved, not only in comparison to past values, but also compared to the national value and values for surrounding states.

Kansas leading economic indicatorKansas leading economic index.

KSSLIND is the leading index for Kansas, which predicts the six-month growth rate of the state’s coincident index. According to its creator, the Federal Reserve Bank of Philadelphia, in addition to the coincident index, “the models include other variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.”

The coincident index includes four indicators, according to its creators: nonfarm payroll employment, the unemployment rate, average hours worked in manufacturing, and wages and salaries.

This index, which is again a leading indicator with a six-month time lag, been improving. In April, when I last looked at this series, the average value for the index for the previous six months had been 0.04. Now, the value for the previous six months is 0.69. Data is available through June, 2011.

Comparing the value for Kansas to that for the nation as a whole and surrounding states plus Iowa, we see some improvement. The value for Kansas, shown in the bold black line, had been right in the middle of the values for these other entities. But about a year ago the value for Kansas began to be lower than these peer values. When assessing this data in April, I wrote “While generally following the same trend, the fact that Kansas’ value is lower than the others means that the near-term economic outlook for our state — while improving — is not as good as for the other states that appear on the chart, and for the nation as a whole.”

Now in recent months the value for Kansas has been above that of Colorado, Iowa, and Missouri.

Kansas leading economic indicator compared to othersKansas leading economic index compared to others.

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