Iowa’s economic outlook remained stable in February, as the Iowa Leading Indicators Index edged up by 0.04%. The index, which serves as a barometer for the state’s future economic direction, rose to 108.1 from a January reading of 108.0.
The slight increase was driven by a broad range of positive contributors, including a surge in the Iowa Stock Market Index, gains in agricultural futures profits and favorable movements in the national yield spread. Though, the growth was tempered by a notable decline in diesel fuel consumption and a significant gap in federal data reporting.
For economists and policymakers, the index is less about monthly fluctuations and more about identifying “turning points.” The Iowa Department of Revenue uses the tool to signal potential economic contractions. A warning sign is triggered only when two specific conditions are met simultaneously: a six-month annualized change in the index falling below -2.0% and a six-month diffusion index dropping below 50.0.
Market Strength and Agricultural Gains
The most significant driver of February’s growth was the Iowa Stock Market Index. The index climbed to 190.32 from 182.35 in January, contributing 0.07 to the overall leading indicators. This growth was widespread, with 21 of the 27 companies tracked within the index seeing an increase in value.
Beyond the stock market, several other key metrics provided a tailwind for the state’s economy. The agricultural futures profits index and the new orders index both trended upward, while initial unemployment insurance claims also contributed positively to the index’s movement.
This positive momentum is not limited to February alone. Over the last six months, five of the six available component indicators have increased by more than 0.05%, suggesting a consistent, if modest, upward trend in the state’s core economic drivers.
The Diesel Drag
While most indicators pointed upward, diesel fuel consumption acted as the primary detractor. The report indicates a 7.3% year-over-year decrease in diesel use, reflecting a cooling in certain industrial or transport sectors. The 12-month moving average for diesel consumption dipped to 65.57 million gallons in February, down from 65.98 million gallons in January.
Because diesel consumption failed to increase by the 0.05% threshold over the past six months, it did not contribute to the six-month diffusion index, highlighting a divergence between financial market strength and physical energy consumption.
Data Gaps Amid Federal Shutdown
The February reading was produced under constrained circumstances. Due to a federal government shutdown, critical data from the Bureau of Labor Statistics and the U.S. Census Bureau were unavailable.
Specifically, average manufacturing hours and residential building permits—two pillars of the index—were neutralized. This means they contributed 0.0 to the index for the month. These components will remain neutralized until the federal agencies release the missing data, at which point the Iowa Department of Revenue can include them in retrospective revisions.
The lack of housing and manufacturing data creates a partial blind spot in the current snapshot, as these sectors often provide the earliest warnings of shifts in consumer confidence and industrial demand.
Understanding the Diffusion Index
While the overall index rose, the monthly diffusion index saw a decline, dropping to 62.5 from 87.5 in January. The diffusion index measures the percentage of components that are improving; a higher number suggests that growth is broad-based across different sectors of the economy, while a lower number suggests that the overall index increase may be carried by only a few strong performers.
| Indicator Category | February Impact | Trend/Detail |
|---|---|---|
| Iowa Stock Market Index | Positive (Largest) | Rose to 190.32 |
| Diesel Fuel Consumption | Negative (Largest) | -7.3% Year-over-Year |
| Manufacturing/Housing | Neutral | Data missing (Fed Shutdown) |
| Agricultural Futures | Positive | Increased > 0.05% (6-mo) |
Despite the dip in the diffusion index, the state remains far from the “contraction signal” threshold. With the majority of available indicators trending upward over the half-year mark, the current data suggests resilience rather than a coming downturn.
Disclaimer: This report is based on economic indicators provided for informational purposes and does not constitute financial or investment advice.
The next official update to the Leading Indicators Index is expected following the release of the March data, provided that federal data streams from the Census Bureau and BLS are restored to allow for a complete analysis of manufacturing and housing sectors.
We invite readers to share their perspectives on Iowa’s current economic climate in the comments below.
