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Released: Thursday, July 22, 2004

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 held steady in June.

  • The leading index fell slightly in June, the first decline since March 2003, and last month's increase was revised down slightly. June's weakness was not widespread, and some of the decline was from the average manufacturing workweek (which was most likely the result of many businesses being closed for President Reagan's funeral).
  • The coincident index continued increasing in June, keeping its growth rate in the 3.0 to 3.5 percent (annual rate) range. In addition, the upward trend of the coincident index continues to be widespread.
  • While the leading index is still on an upward trend, its growth rate has slowed in recent months – into the 2.5 to 3.5 percent range (annual rate). The current behavior of the leading index is consistent with real GDP increasing at a 4.0 to 5.0 percent annual rate in the near term.

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

The leading index now stands at 116.2 (1996=100). Based on revised data, this index increased 0.4 in May and increased 0.1 percent in April. During the six-month span through June, the leading index increased 1.5 percent, with eight out of ten components advancing (diffusion index, six-month span equals 80 percent).

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

The coincident index now stands at 117.6 (1996=100). This index increased 0.3 percent in May and increased 0.3 percent in April. During the six-month period through June, the coincident index increased 1.6 percent.

Lagging Indicators.The lagging index stands at 97.8 (1996=100) in June, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were change in CPI for services, average duration of unemployment (inverted), ratio of manufacturing and trade inventories to sales*, and ratio of consumer installment credit to personal income*. The negative contributors were commercial and industrial loans outstanding*, and change in labor cost per unit of output*. The average prime rate charged by banks held steady in June. Based on revised data, the lagging index increased 0.1 percent in May and remained unchanged in April.

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 July 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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