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Released: Thursday, February 19, 2004

The Conference Board announced today that the U.S. leading index increased 0.5 percent, the coincident index increased 0.3 percent and the lagging index did not change in January.

  • The leading index continued increasing in January. The 0.5 percent gain was the largest increase since October. The leading index has now increased at a 5.0 percent annual rate from its most recent low in March, and this growth has continued to be widespread. The one exception has been the real money supply, which continued declining in January.
  • The coincident index also increased in January, and has now grown at a 2.0 percent annual rate from its most recent low in April. Every component (production, sales, income, and employment) has contributed to the growth of the coincident index.
  • Real GDP increased at a 6.1 percent annual rate during the second half of 2003, consistent with the pickup in the leading index that began in the second quarter. The continued growth in the leading index (about a 5.5 percent annual rate excluding the recent weakness in the money supply) is signaling that strong economic growth should persist in the near term.

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

The leading index now stands at 115.0 (1996=100). This index increased 0.2 percent in December and increased 0.3 percent in November. During the six-month span through January, the leading index increased 2.0 percent, with eight out of ten components advancing (diffusion index, six-month span equals 80 percent).

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

The coincident index now stands at 115.8 (1996=100). This index held steady in December and increased 0.3 percent in November. During the six-month period through January, the coincident index increased 1.0 percent.

Lagging Indicators. The lagging index stands at 98.2 (1996=100) in January, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were change in labor cost per unit of output*, ratio of consumer installment credit to personal income*, change in CPI for services* and ratio of manufacturing and trade inventories to sales*. The negative contributors - beginning with the largest negative contributor – were average duration of unemployment (inverted) and commercial and industrial loans outstanding*. The average prime rate charged by banks held steady in January. Based on revised data, the lagging index decreased 0.4 percent in December and decreased 0.5 percent in November.

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 February 18, 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 CPI for services 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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