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Released: Thursday, March 18, 2004

The Conference Board announced today that the U.S. leading index held steady, the coincident index increased 0.3 percent and the lagging index also held steady in February.

  • The leading index was unchanged in February, but there were also upward revisions to previous months. As a result, the leading index is increasing at a 3.0 to 4.0 percent annual rate, and this growth continues to be widespread.
  • The coincident index increased again in February, and has now grown at about a 2.0 percent annual rate from its most recent low in April 2003. The growth in the coincident index also has been widespread over the last six months (production, sales, income, and employment).
  • The upturn in the leading index since March 2003 has been signaling stronger economic growth, and real GDP growth picked up to a 6.1 percent annual rate during the second half of 2003. While the growth rate of the leading index has slowed somewhat in recent months, it is still signaling relatively strong economic growth in the near term.

Leading Indicators. Six of the ten indicators that make up the leading index increased in February. The positive contributors - beginning with the largest positive contributor – were real money supply*, vendor performance, 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 index of consumer expectations, average weekly initial claims for unemployment insurance (inverted), building permits, and interest rate spread.

The leading index now stands at 115.1 (1996=100). Based on revised data, this index increased 0.4 percent in January and increased 0.4 percent in December. During the six-month span through February, the leading index increased 1.7 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 February. 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 116.1 (1996=100). This index increased 0.1 percent in January and increased 0.1 percent in December. During the six-month period through February, the coincident index increased 1.2 percent.

Lagging Indicators.The lagging index stands at 98.2 (1996=100) in February, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were commercial and industrial loans outstanding*, ratio of consumer installment credit to personal income*, change in labor cost per unit of output*, and change in CPI for services. The negative contributor was average duration of unemployment (inverted). The average prime rate charged by banks and the ratio of manufacturing and trade inventories to sales* held steady in February. Based on revised data, the lagging index increased 0.1 percent in January and decreased 0.4 percent in December.

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 March 17, 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 February 22, 2004 release a programming error in the calculation of the leading index -- in place since February 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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