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Released: Thursday, September 18, 2003

The Conference Board announced today that the U.S. leading index increased 0.4 percent, and the coincident and lagging indexes held steady in August.

  • The leading index increased again in August, and is now up by 2.5 percent from its low in March (more than a 6.0 percent annual rate). In addition, the strength in the leading index has been widespread over this period.
  • The coincident index was unchanged in August, but has been rising gradually from its recent low in April. The growth rate of the coincident index has picked up to about 1.2 percent (annual rate) over the last four months, and this growth has also been widespread - only employment has continued declining.
  • The upturn in the leading index since March has already been followed by stronger real GDP growth in the second quarter and by the recent increases in the coincident index. In addition, the recent strength in the leading index suggests a further strengthening of economic growth in the second half of the year.

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

The leading index now stands at 113.3 (1996=100). Based on revised data, this index increased 0.6 percent in July and 0.4 percent in June. During the six-month span through August, the leading index increased 2.4 percent, with eight of the ten components advancing (diffusion index, six-month span equals 85 percent).

Coincident Indicators. Three of the four indicators that make up the coincident index increased in August. 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 August.

The coincident index now stands at 115.4 (1996=100). This index increased 0.2 percent in July and 0.1 percent in June. During the six-month period through August, the coincident index increased 0.3 percent.

Lagging Indicators. The lagging index held steady at 98.1 (1996=100) in August, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were average duration of unemployment (inverted), change in labor cost per unit of output*, ratio of consumer installment credit to personal income*, and ratio of manufacturing and trade inventories to sales*. The two negative contributors were commercial and industrial loans outstanding* and change in CPI for services. Average prime rate charged by banks held steady in August. The lagging index increased 0.1 percent in July and decreased 0.9 percent in June.

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 September 17, 2003. Some series are estimated as noted below.

** 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.

Effective with the September 18, 2003 release, the method for calculating manufacturers’ new orders for consumer goods and materials (A0M008) and manufacturers’ new orders for nondefense capital goods (A0M027) has been revised. Both series are now constructed by deflating nominal aggregate new orders data instead of aggregating deflated industry level new orders data. Both the new and the old methods utilize appropriate producer price indices. This simplification remedies several issues raised by the recent conversion of industry data to the North American Classification System (NAICS), as well as several other issues, e.g. the treatment of semiconductor orders. While this simplification caused a slight shift in the levels of both new orders series, the growth rates were essentially the same. As a result, this simplification had no significant effect on the leading index.

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

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