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Released: Monday, October 20, 2003

The Conference Board announced today that the U.S. leading index decreased 0.2 percent, the coincident index increased 0.1 percent and the lagging index decreased 0.5 percent in September.

  • The leading index declined by 0.2 percent in September, led by a large negative contribution from the money supply. The coincident index increased by 0.1 percent in September, resuming the gradual upward trend underway since April.
  • The leading index had increased for four consecutive months before September’s decline, and is still up by 2.3 percent from its recent low in March (about a 5.0 percent annual rate). The upturns in both the leading and coincident indices since earlier this year have been widespread.
  • The upturn in the leading index since March has already been followed by a pickup in economic growth (both real GDP and the coincident index) and other signs are emerging that moderately strong growth is persisting for now. While it is not likely that September’s small decline indicates that the recent upward trend in the leading index has ended, a continuation of stronger economic growth would be called into doubt if the leading index does not turn up again.

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

The leading index now stands at 113.0 (1996=100). Based on revised data, this index increased 0.4 percent in August and 0.7 percent in July. During the six-month span through September, the leading index increased 2.3 percent, with eight of the ten components advancing (diffusion index, six-month span equals 85 percent).

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

The coincident index now stands at 115.7 (1996=100). This index held steady in August and increased 0.3 percent in July. During the six-month period through September, the coincident index increased 0.5 percent.

Lagging Indicators. The lagging index stands at 97.4 (1996=100) in September, with three of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were ratio of consumer installment credit to personal income*, ratio of manufacturing and trade inventories to sales*, and change in labor cost per unit of output*. The three negative contributors were commercial and industrial loans outstanding*, average duration of unemployment (inverted), and change in CPI for services. Average prime rate charged by banks held steady in September. The lagging index held steady in August and decreased 0.1 percent in July.

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 October 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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