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Released: Thursday, June 19, 2003

The Conference Board announced today that the U.S. leading index increased 1.0 percent, the coincident index increased 0.1 percent, and the lagging index decreased 0.1 percent in May.

  • The leading index increased sharply in May following a slight gain in April. This increase was largely due to stock prices, real money supply, and consumer expectations, but most other components also increased slightly. It is possible that these two consecutive increases reflect the beginning of an upward trend, thereby ending the flat trend that began in early 2002.
  • The strength in the leading indicators has become more widespread as shown by a pick-up in the diffusion indexes, which measure the proportion of the components that are rising. The one- and six-month diffusion indexes are now at or above fifty percent, up from lower levels earlier in the year.
  • The coincident index, a measure of current economic conditions, increased modestly in May after holding steady in the previous two months. The coincident index remained essentially flat in the second quarter, but is likely to increase in the second half of the year reflecting the recent gains in the leading index.

Leading Indicators. Eight of the ten indicators that make up the leading index increased in May. The positive contributors - beginning with the largest positive contributor – were real money supply*, index of consumer expectations, stock prices, average weekly initial claims for unemployment insurance (inverted), vendor performance, building permits, average weekly manufacturing hours, and manufacturers’ new orders for consumer goods and materials*. The interest rate spread declined in May and manufacturers’ new orders for nondefense capital goods* held steady.

The leading index now stands at 111.6 (1996=100). This index increased 0.1 percent in April and decreased 0.2 percent in March. During the six-month span through May, the leading index increased 0.5 percent, with half of the ten components advancing (diffusion index, six-month span equals 50 percent).

Coincident Indicators. Three of the four indicators that make up the coincident index increased in May. The positive contributors to the index - beginning with the largest positive contributor - were personal income less transfer payments*, manufacturing and trade sales*, and industrial production. Employees on nonagricultural payrolls declined in May.

The coincident index now stands at 115.2 (1996=100). Based on revised data, this index held steady in both April and March. During the six-month period through April, the coincident index decreased 0.1 percent.

Lagging Indicators. The lagging index decreased 0.1 percent to 98.8 (1996=100) in May, with only one of the seven components declining. The negative contributor to the index was commercial and industrial loans outstanding*. The positive contributors to the index were change in CPI for services, average duration of unemployment, ratio of consumer installment credit to personal income*, and ratio of manufacturing and trade inventories to sales*. Change in labor cost per unit of output* and average prime rate charged by banks held steady in May. Based on revised data, the lagging index decreased 0.4 percent in April and decreased 0.3 percent in March.

Data Availability. The data series used by The Conference Board to compute the three composite indexes and reported in the tables in this release are those available “as of” 12 Noon on May 18, 2003. Some series are estimated as noted below.

*Notes: Series in the leading index that are based on The Conference Board estimates are manufacturers’ new orders for consumer goods and materials, manufacturers’ new orders for nondefense capital goods, and the personal consumption expenditure deflator for money supply. Series in the coincident index that are based on The Conference Board estimates are personal income less transfer payments and manufacturing and trade sales. Series in the lagging index that are based on The Conference Board 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 deflator for 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 U.S. Leading Economic Indicators.

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

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