After several stagnant months, the "leading index" for Indiana rose from 99.4 in July to 99.6 in August because of housing market gains, particularly in the Midwest.
The index is a predictive tool that indicates the general direction of future economic activity in Indiana in the next four to six months.
The increase was "almost exclusively" because "home builder sentiment continues to improve," said Timothy Slaper, director of economic analysis at the Indiana Business Research Center at Indiana University's Kelley School of Business, which compiles the monthly report.
He explained that the housing market index of the National Association of Home Builders/Wells Fargo increased 2 points from 35 in July to 37 in August. The rise is attributed to an increase in the South and Midwest regions (the Northeast and West regions both fell from July to August) with the greatest increase in the Midwest region, where the index soared 9 points to a preliminary reading of 42 in August.
But, while these levels haven't been seen since early 2007, it might be too soon to get excited, Slaper said.
"(The Midwest index) really popped, which makes me kind of cautious," he said in a phone interview. "I'd like to know why ours went up so much relative to other regions."
He explained that the Midwest's numbers might be revised in the future. They are, after all, a prediction of how many single-family houses homebuilders think they will build in the next six months and not based on the number of homes actually built. So, while the increase does show growth in homebuilders' confidence, a good sign, it does not reflect actual growth in the economy.
Most other components factored into the leading index for Indiana were flat or gave conflicting signals, Slaper said.
"In terms of the housing market, we saw that permits and starts moved in different directions," he said. Housing starts fell slightly from June to July, while building permits rose.
Gas prices are up, which will "erode the consumer spending that helps to drive the economy," he said, but car sales continue to exceed the 14 million unit sales mark. In fact, July car sales were almost 9 percent greater than last year. Unfilled orders for motor vehicle bodies, parts and trailers -- which have been increasing steadily since January 2010 -- edged up almost imperceptibly.
However, he said, "We don't have sustained strong movement in one direction."
And, while the "average Joe" is probably not concerned with the global economy, Slaper said, he believes the slowing global growth is a concern for the investor class and economic analysts.
It has many investors looking for safe assets, even if it means they get a nominal return, he said, in a news release.
"Given the continued uncertainty surrounding the debt crisis in Europe, the global economic slowdown and the potential for hostilities between Iran and Israel, the demand for safe assets is strong."