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Released: Thursday, October 21, 2004

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

  • The leading index fell again in September, the fourth consecutive decline, and the weakness in the last four months has become more widespread. However, these declines in the leading index have not been large enough nor have they persisted long enough to signal an end to the current economic expansion.
  • The coincident index, an index of current economic activity, increased again in September and its growth continues to be widespread. Real GDP growth slowed to a 3.3 percent annual rate in the second quarter, but appears to have picked up again in the third quarter.
  • While the leading index is not yet signaling a downturn, the growth rate of the leading index has slowed below its long-term trend growth rate, which is consistent with real GDP continuing to grow in the near term, but more slowly than its long-term trend rate.

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

The leading index now stands at 115.6 (1996=100). Based on revised data, this index decreased 0.1 percent in September and decreased 0.3 percent in August. During the six-month span through September, the leading index decreased 0.2 percent, with three out of ten components advancing (diffusion index, six-month span equals 30 percent).

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

The coincident index now stands at 118 (1996=100). This index increased 0.2 percent in September and increased 0.1 percent in August. During the six-month period through September, the coincident index increased 1.0 percent.

Lagging Indicators. The lagging index stands at 98.1 (1996=100) in September, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were average prime rate charged by banks, change in labor cost per unit of output*, commercial and industrial loans outstanding*, and ratio of manufacturing and trade inventories to sales*. The negative contributors were average duration of unemployment (inverted) and change in CPI for services. The ratio of consumer installment credit to personal income* held steady in September. Based on revised data, the lagging index remained unchanged in September and decreased 0.3 percent in August.

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 October 20, 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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