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Released: Thursday, January 22, 2004

This month’s release incorporates annual benchmark revisions to the composite indexes which brings them up-to-date with revisions in component data. Also, several components of the composite indexes that were in chain-weighted 1996$ have been changed to chain-weighted 2000$. These revisions do not change the cyclical properties of the indexes. For more information, visit our web site at www.globalindicators.org.

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

  • The leading index continued increasing in December, and the annual benchmark revisions had very little effect on growth in recent months. The coincident index also increased again in December, and the gains in recent months have been widespread among its components (production, sales, income, and even employment).
  • The leading index has now increased at a 4.7 percent annual rate from its most recent low in March, and this pickup has continued to be widespread. The exception is a sharp decline in the money supply (M2), which caused a slowdown in the growth rate of the leading index to only 3.0 percent over the last four months. Excluding the money supply, the growth rate of the leading index is still almost 5.0 percent.
  • Consistent with the upturn in the leading index, real GDP growth jumped to at least a 6.0 percent average annual rate in the second half of 2003. The continued growth in the leading index in recent months is signaling that strong economic growth (in the 5.0-6.0 percent range) should persist in the near term.

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

The leading index now stands at 114.3 (1996=100). This index increased 0.2 percent in November and increased 0.5 percent in October. During the six-month span through December, the leading index increased 2.1 percent, with nine out of ten components advancing (diffusion index, six-month span equals 90 percent).

Coincident Indicators. Three of the four indicators that make up the coincident index increased in December. 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 remained unchanged.

The coincident index now stands at 115.7 (1996=100). This index increased 0.3 percent in November and increased 0.2 percent in October. During the six-month period through December, the coincident index increased 1.1 percent.

Lagging Indicators. The lagging index stands at 98.9 (1996=100) in December, 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 CPI for services, ratio of consumer installment credit to personal income*, and change in labor cost per unit of output*. Commercial and industrial loans outstanding*, average prime rate charged by banks, and ratio of manufacturing and trade inventories to sales* held steady in December. The lagging index decreased 0.3 percent in November and held steady in October.

Data Availability and Notes. 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 January 21, 2004. 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.

Effective with the January 22, 2004 release a programming error in the calculation of the leading index—in place since January 2002—has been corrected. The cyclical behavior of the leading index was not affected by either the calculation error or its correction, but the level of the index in the 1959-1996 period is slightly higher.

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

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