The Conference Board Leading Economic Index™ (LEI) for the U.S. Improves Again

Press Release / News

Aug. 20, 2009

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The Conference Board Leading Economic Index™ (LEI) for the U.S. increased 0.6 percent, The Conference Board Coincident Economic Index™ (CEI) remained unchanged and The Conference Board Lagging Economic Index™ (LAG) decreased 0.3 percent in July.

Download a PDF of the technical notes for underlying detail, diffusion indexes, components, contributions and graphs.

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The Conference Board LEI for the U.S. rose again in July, its fourth consecutive increase. The six-month change in the index has risen to 3.0 percent (a 6.2 percent annual rate) in the period through July, up substantially from -2.8 percent (a -5.4 percent annual rate) for the previous six months, and the strengths among the leading indicators have grown more widespread in recent months. The interest rate spread, initial unemployment claims and the average workweek made large positive contributions to the index this month, more than offsetting the negative contributions from consumer expectations, real money supply, and building permits.
The Conference Board CEI for the U.S. was unchanged in July, after decreasing for the past consecutive eight months. Index levels were revised slightly lower in recent months as a result of downward revisions to personal income. Between January and July 2009, the index fell 2.7 percent (a -5.4 percent annual rate), slower than the decline of 3.5 percent (a -6.8 percent annual rate) for the previous six months. In July, the lagging economic index for the U.S. fell again, and with the coincident economic index remaining unchanged, the coincident-to-lagging ratio increased further. Meanwhile, real GDP fell at a 1.0 percent annual rate in the second quarter, following a contraction of 6.4 percent annual rate for the first quarter of the year.
After having fallen steadily since reaching a peak in July 2007, The Conference Board LEI for the U.S. has increased sharply in the last four months, amid widespread strength among its components. As a result, the six-month growth rate in the index has accelerated to its highest rate since the middle of 2004. Meanwhile, the decline in The Conference Board CEI for the U.S. has gradually moderated in recent months. All in all, the behavior of the composite indexes suggests that the recession is bottoming out and that economic activity will likely begin to recover soon.

LEADING INDICATORS. Six of the ten indicators that make up The Conference Board LEI for the U.S. increased in July. The positive contributors – beginning with the largest positive contributor – were interest rate spread, average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, index of supplier deliveries (vendor performance), stock prices, and manufacturers' new orders for nondefense capital goods*. The negative contributors – beginning with the largest negative contributor – were index of consumer expectations, real money supply*, and building permits. The manufacturers' new orders for consumer goods and materials* held steady in July.

The Conference Board LEI for the U.S. now stands at 101.6 (2004=100). Based on revised data, this index increased 0.8 percent in June and increased 1.2 percent in May. During the six-month span through July, the leading economic index increased 3.0 percent, with eight out of ten components advancing (diffusion index, six-month span equals 85 percent).

COINCIDENT INDICATORS. Three of the four indicators that make up The Conference Board CEI for the U.S. increased in July. The positive contributors to the index – beginning with the largest positive contributor – were industrial production, personal income less transfer payments* and manufacturing and trade sales*. The negative contributor was employees on nonagricultural payrolls.

The Conference Board CEI for the U.S. now stands at 99.7 (2004=100). This index decreased 0.4 percent in June and decreased 0.4 percent in May. During the six-month period through July, the coincident economic index decreased 2.7 percent, with none of the four components advancing (diffusion index, six-month span equals 0.0 percent).

LAGGING INDICATORS. The Conference Board LAG for the U.S. stands at 110.8 (2004=100) in July, with one of the seven components advancing. The positive contributor to the index was the ratio of consumer installment credit to personal income*. The negative contributors – beginning with the largest negative contributor – were commercial and industrial loans outstanding*, average duration of unemployment (inverted), change in labor cost per unit of output*, change in CPI for services and the ratio of manufacturing and trade inventories to sales*. The average prime rate charged by banks held steady in July. Based on revised data, the lagging economic index decreased 0.7 percent in June and decreased 0.6 percent in May.

DATA AVAILABILITY AND NOTES. The data series used to compute The Conference Board Leading Economic Index™ (LEI) for the U.S., The Conference Board Coincident Economic Index™ (CEI) for the U.S. and The Conference Board Lagging Economic Index™ (LAG) for the U.S. and reported in the tables in this release are those available "as of" 12 Noon on August 19, 2009. Some series are estimated as noted below.

* Series in The Conference Board LEI for the U.S. based on our estimates are manufacturers' new orders for consumer goods and materials, manufacturers' new orders for nondefense capital goods, and the personal consumption expenditure used to deflate the money supply. Series in The Conference Board CEI for the U.S. that are based on our estimates are personal income less transfer payments and manufacturing and trade sales. Series in The Conference Board LAG for the U.S. that are based on our estimates are inventories to sales ratio, consumer installment credit to income ratio, change in labor cost per unit of output, and the personal consumption expenditure used to deflate commercial and industrial loans outstanding.

The procedure used to estimate the current month's personal consumption expenditure deflator (used in the calculation of real money supply and commercial and industrial loans outstanding) now incorporates the current month's consumer price index when it is available before the release of The Conference Board LEI for the U.S.

The next release is scheduled for Monday, September 21, 2009 at 10 A.M. ET.

For further information contact:
Frank Tortorici
(1) 212 339 0231
f.tortorici@conference-board.org

Kenneth Goldstein
1 212 339 0331
ken.goldstein@conference-board.org

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.