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Released: Monday, December 20, 2004

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

  • The leading index increased in November, following five consecutive declines. In addition, the weakness in the leading indicators in recent months has become somewhat less widespread. It is too early to conclude that the recent weakness in the leading index was only a pause in the rising trend, but to date the decline was not large enough and did not persist for long enough to signal an end to the current economic expansion.
  • The coincident index, an index of current economic activity, increased again in November and the strength in the coincident index continues to be widespread. At the same time, real GDP growth in the third quarter was revised up slightly to a 3.9 percent annual rate, a pickup from 3.3 percent growth in the second quarter.
  • The growth rate of the leading index has slowed below its long-term trend, but not to a rate historically associated with a recession. The current behavior of the leading index is consistent with the economy continuing to expand in the near term, but more slowly than its long-term trend rate.

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

The leading index now stands at 115.2 (1996=100). Based on revised data, this index decreased 0.4 percent in October and decreased 0.2 percent in September. During the six-month span through November, the leading index decreased 1.1 percent, with five out of ten components advancing (diffusion index, six-month span equals fifty percent).

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

The coincident index now stands at 118.5 (1996=100). This index increased 0.4 percent in October and remained unchanged in September. During the six-month period through November, the coincident index increased 0.9 percent.

Lagging Indicators.The lagging index stands at 98.3 (1996=100) in November, 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 CPI for services, 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*, average duration of unemployment (inverted), and change in labor cost per unit of output*. Based on revised data, the lagging index increased 0.1 percent in October and increased 0.1 percent in September.

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 December 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 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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