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Released: Monday, January 23, 2006

This month's release incorporates annual benchmark revisions to the composite indexes which bring them up-to-date with revisions in the source data. The indexes are updated throughout the year, but only for the previous six months. Data revisions that fall outside of the moving six-month window are not incorporated until the January release of each year when an annual benchmark revision is made and the entire histories of the indexes are recomputed.  More information.

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

  • The leading index increased slightly in December, following large gains in October and November. The six month growth rate of the leading index picked up to a 2.1 percent annual rate in December from a low of 0.6 percent in May. In addition, the strength among the leading indicators has been widespread since August. In 2005, the average six-month growth rate of the leading index was about a 1.9 percent annual rate, down from an average of about 6.2 percent in 2004.
  • The coincident index, a measure of current economic activity, increased again in December. It has been on a relatively steady upward trend since April 2003, but its growth rate has moderated since June 2005. The six-month growth rate of the coincident index has been fluctuating around a 1.5 percent annual rate in the last four months. The coincident index grew at almost a 2.0 percent annual rate in 2005, down from about 3.0 percent in 2004.
  • The leading index grew strongly from mid-2003 to mid-2004, but it has been fluctuating around a more moderate upward trend since mid-2004. The strengths and weaknesses among the leading indicators were balanced through mid-2005, and the strength has become somewhat more widespread in recent months. The current behavior of the leading index suggests the economy should continue expanding moderately in the near term.

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

The leading index now stands at 138.5 (1996=100). Based on revised data, this index increased 0.9 percent in November and increased 1.0 percent in October. During the six-month span through December, the leading index increased 1.0 percent, with seven out of ten components advancing (diffusion index, six-month span equals seventy percent).

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

The coincident index now stands at 121.1 (1996=100). Based on revised data, this index increased 0.4 percent in November and increased 0.2 percent in October. During the six-month period through December, the coincident index increased 0.7 percent.

Lagging Indicators. The lagging index stands at 122.3 (1996=100) in December, with five of the seven components advancing. The positive contributors to the index - beginning with the largest positive contributor - were average duration of unemployment (inverted), average prime rate charged by banks, ratio of manufacturing and trade inventories to sales*, ratio of consumer installment credit to personal income*, and change in labor cost per unit of output*. The negative contributors - beginning with the largest negative contributor - were commercial and industrial loans outstanding* and change in CPI for services. Based on revised data, the lagging index increased 0.5 percent in November and increased 0.7 percent in October.

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 January 20, 2006. 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 used to deflate the 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, the consumer price index, and the personal consumption expenditure used to deflate 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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