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Released: Thursday, May 18, 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 April.

  • The leading index decreased slightly in April. As a result of data revisions, the small decrease in March was revised up to a small increase. From October to April, the leading index grew 1.5 percent. This is slightly below the average six-month change (1.7 percent) in the first three months of the year. Housing permits made the largest negative contribution to the leading index in March. However, the strengths among the leading indicators have been widespread in recent months.
  • The coincident index continued to increase steadily as it has since September 2005. From October to April, the coincident index grew 1.7 percent and all four components contributed about equally to this growth.
  • After slowing down in 2005, the leading index picked up somewhat in the first four months of 2006, but it is only slightly above its level at the end of 2005. Moreover, the small gains since December have not been very persistent. The current behavior of the leading index suggests economic growth should continue moderately in the near term.

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

The leading index now stands at 138.9 (1996=100). Based on revised data, this index increased 0.4 percent in March and decreased 0.4 percent in February. During the six-month span through April, the leading index increased 1.5 percent, with eight out of ten components advancing (diffusion index, six-month span equals eighty percent).

COINCIDENT INDICATORS. All four indicators that make up the coincident index increased in April. 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 122.6 (1996=100). This index increased 0.2 percent in both March and February. During the six-month period through April, the coincident index increased 1.7 percent.

LAGGING INDICATORS. The lagging index stands at 122.8 (1996=100) in April, with five of the seven components advancing. The positive contributors to the index - beginning with the largest positive contributor - were commercial and industrial loans outstanding*, average prime rate charged by banks, change in labor cost per unit of output*, average duration of unemployment (inverted), and ratio of manufacturing and trade inventories to sales*. The negative contributor was change in CPI for services. The ratio of consumer installment credit to personal income** held steady in April. Based on revised data, the lagging index increased 0.1 percent in March and remained unchanged in February.

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 May 17, 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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