October marks the first month since February 2020 that the Iowa Leading Indicators Index has not shown recessionary signals. However, the October report suggests that employment growth will continue to weaken over the next three to six months, but not as much as in the last seven months, according to the Iowa Department of Revenue. 

The Iowa Leading Indicators Index increased to 103.5 in October from 103.4 in September. October is the third month that the index increased since the COVID-19 crisis began in Iowa. The index has decreased 2.7% since February, the last month before pandemic quarantines began in the state. The monthly diffusion index decreased to 50 in October from 56.3 in September. 

The Iowa nonfarm employment coincident index recorded a 0.41% decline in October, the 11th consecutive month of decline and the seventh-largest one-month decline in the index’s 20-year history, only behind the months of April-September 2020. The six-month diffusion index’s October level, the annualized six-month Iowa Leading Indicators Index change value of -0.4%, and the decline in the Iowa nonfarm employment index suggest the Iowa economy will continue to weaken into the winter. 

The Iowa Leading Indicators Index was constructed to signal economic turning points with two key metrics that when seen together are considered a signal of a coming contraction: a six-month annualized change in the index below -2.0% and a six-month diffusion index below 50.0.

Four of the eight components added to the Iowa Leading Indicators Index’s monthly increase in October: the new orders index, diesel fuel consumption, the national yield spread and the Iowa Stock Market Index. The October 2020 monthly value of the new orders index increased to 82.1 from 80.1 in September, and was higher than the October 2019 value of 59.3.  

• The October 2020 monthly value of the new orders index increased to 82.1 from 80.1 in September, and was higher than the October 2019 value of 59.3.
• Taxable diesel gallons totaled 67.25 million gallons in October, 8% higher than the 62.25 million gallons recorded for October 2019.
• The yield spread expanded to 0.69% from 0.57% in September. The long-term rate increased 11 basis points while the short-term rate decreased one basis point.
• Twenty-three of the 31 companies in the Iowa Stock Market Index gained value, including nine of the 11 financial-sector companies.

The full Iowa Leading Indicators Index for October is available online.