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Released: Thursday, April 20, 2006

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 increased 0.3 percent in March.

  • The leading index decreased slightly in March, and February's decrease was revised down due to data revisions in several underlying components. Despite the weakness in the leading index in February and March, its six month growth rate picked up to an average of 3.2 percent annual rate in the first quarter, up from an average growth rate of 2.7 percent in the fourth quarter, which was higher than its average growth of 1.8 percent in 2005. In addition, the strengths among the leading indicators have been widespread in recent months.
  • The coincident index increased again in March, and it has been increasing steadily since September 2005. The six month growth rate of the coincident index picked up to a range of 3.0 to 4.0 percent annual rate in the first quarter, up from an average growth of about 2.0 percent in the fourth quarter of 2005, and the strengths among the coincident indicators have been widespread in recent months.
  • The growth of the leading index has slowed steadily since mid-2004 while fluctuating around a moderate upward trend. At the same time, economic activity has slowed from strong to more moderate growth through the first quarter. The current behavior of the leading index suggests economic growth should continue moderately in the near term.

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

The leading index now stands at 138.4 (1996=100). Based on revised data, this index decreased 0.5 percent in February and increased 0.4 percent in January. During the six-month span through March, the leading index increased 1.9 percent, with seven out of ten components advancing (diffusion index, six-month span equals seventy percent).

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

The coincident index now stands at 122.4 (1996=100). This index increased 0.2 percent in February and increased 0.1 percent in January. During the six-month period through March, the coincident index increased 1.9 percent.

LAGGING INDICATORS. The lagging index stands at 122.9 (1996=100) in March, 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), change in labor cost per unit of output*, ratio of manufacturing and trade inventories to sales*, ratio of consumer installment credit to personal income*, and average prime rate charged by banks. The negative contributor was the change in CPI for services. The commercial and industrial loans outstanding* held steady in March. Based on revised data, the lagging index increased 0.1 percent in February and increased 0.4 percent in January.

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 April 19, 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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