The Greater Philadelphia economy started growing again during the first quarter of 2010, according to Select Greater Philadelphia’s and IHS Global Insight’s Coincident Indicator for the Greater Philadelphia region. The Coincident Indicator, which is designed to measure the current level of economic activity in the region, reached a low value of 90.7 in February, and has risen gradually during the last two months. Prior to the first increase in March, the Coincident Indicator had declined for 22 months in a row.
A coincident indicator is a measure of economic activity whose changes track closely with current changes in the overall economy. In other words, coincident indicators vary directly with movements in the business cycle. For the U.S. economy, and often for regional economies, variables that serve as coincident indicators include, among others: employment in non-basic sectors such as trade, personal income excluding transfer payments, total employment, tax collections, passenger trips, retail sales, and even hotel occupancy rates.
While the most recent monthly values of the Coincident Indicator continue to be less than its 12-month moving average, the difference has been steadily declining since April 2009, further evidence that a turning point in the region’s economy was near.
The upturn in the Coincident Indicator had been predicted by the fall and winter releases of the Leading Indicator, which is designed to forecast the level of economic activity six to nine months ahead. The Leading Indicator first began rising in April 2009, before declining slightly in October and November of last year, suggesting that a moderate recovery was likely to begin in the first quarter of 2010. The Leading Indicator has also increased in each of the last two months.
The monthly values of the Leading Indicator have been above its 12-month moving average since August 2009, providing further evidence that the trough has occurred and that a gradual economic recovery will follow during this second quarter of 2010.
“The Leading Indicator in April 2010 is about 1.7 points above its low point reached in March 2009,” said James Diffley, group managing director of IHS Global Insight’s U.S. Regional Services Group. “The Leading Indicator’s 12-month moving average also rose 0.3 points during the last four months of 2010, further confirming that a recovery is currently underway.”
“All signs point to a positive, albeit moderate economic recovery that began during the first quarter of 2010,” said Phil Hopkins, vice president of research for Select Greater Philadelphia. “The Leading Indicator’s overall upward trend since April 2009, combined with upward turn of the Coincident Index in March 2010, provides promising news for the region’s economic outlook during the next several months. The remaining uncertainty lies with the strength of the recovery, especially the length of time needed to attain the pre-recession level of total employment.”
The Leading Indicator provides important signals about the direction of future economic conditions in the Greater Philadelphia region and was launched as part of a growing need to understand how global and national events impact the economy of Greater Philadelphia, particularly given the turbulent economic conditions of the last several years. Similarly, the Coincident Indicator was designed to gauge the current level of economic activity in the region.
A leading indicator is an economic variable that changes before