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Released: Thursday, June 17, 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 increased 0.1 percent in May.

  • The leading index increased again in May, and the increases in recent months have continued to be widespread. May's 0.5 percent increase keeps the current growth rate of the leading index in the 3.5 to 4.5 percent range (annual rate), about the same as the approximately 4.5 percent growth rate since the low in March 2003.
  • The coincident index continued on its steady upward trend in May, and in addition, there were upward revisions to the previous several months. The growth rate of the coincident index has picked up to about 3.5 percent (annual rate), and every component has been contributing to this strength.
  • The pickup in the growth rate of the leading index last year signaled stronger economic growth, and correspondingly, real GDP has increased at a 5.0 to 5.5 percent annual rate since the middle of last year. The current 3.5 to 4.5 percent growth rate of the leading index is signaling the continuation of this relatively strong rate of economic growth in the near term.

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

The leading index now stands at 116.5 (1996=100). Based on revised data, this index increased 0.1 percent in April and increased 0.8 percent in March. During the six-month span through May, the leading index increased 2.0 percent, with nine out of ten components advancing (diffusion index, six-month span equals 90 percent).

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

The coincident index now stands at 117.6 (1996=100). This index increased 0.3 percent in April and increased 0.4 percent in March. During the six-month period through May, the coincident index increased 1.7 percent.

Lagging Indicators.The lagging index stands at 97.9 (1996=100) in May, with two of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were change in CPI for services, and commercial and industrial loans outstanding*. The negative contributors were average duration of unemployment (inverted) and change in labor cost per unit of output*. The ratio of manufacturing and trade inventories to sales*, average prime rate charged by banks, and ratio of consumer installment credit to personal income* held steady in May. Based on revised data, the lagging index increased 0.1 percent in April and decreased 0.3 percent in March.

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 June 16, 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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