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Released: Thursday, July 20, 2006

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 0.6 percent in June.

  • The leading index increased slightly in June, following two consecutive declines. The largest negative contributors to the leading index in June were vendor performance and building permits. From December to June, the leading index fell by 0.3 percent (a -0.6 percent annual rate). Declining housing permits continued to be the largest negative contributor over this period.
  • The coincident index, a measure of current economic activity, continued to increase steadily as it has since September 2005. But its growth moderated slightly in the second quarter of 2006. From December to June, the coincident index grew 1.1 percent (a 2.2 percent annual rate), and employment and industrial production were the major contributors to this growth.
  • The leading index has fallen below its most recent high reached in January and the strengths among the leading indicators have gradually become less widespread in recent months. The current behavior of the leading index suggests that economic growth should continue, but at a slow to moderate rate in the near term.

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

The leading index now stands at 138.1 (1996=100). Based on revised data, this index decreased 0.6 percent in May and decreased 0.1 percent in April. During the six-month span through June, the leading index decreased 0.3 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 June. The positive contributors to the index - beginning with the largest positive contributor - were industrial production, personal income less transfer payments*, employees on nonagricultural payrolls, and manufacturing and trade sales*.

The coincident index now stands at 122.9 (1996=100). Based on revised data, this index increased 0.1 percent in May and increased 0.2 percent in April. During the six-month period through June, the coincident index increased 1.1 percent.

LAGGING INDICATORS. The lagging index stands at 123.7 (1996=100) in June, with all seven components advancing. The positive contributors to the index - beginning with the largest positive contributor - were average duration of unemployment (inverted), commercial and industrial loans outstanding*, change in CPI for services, change in labor cost per unit of output*, average prime rate charged by banks, ratio of consumer installment credit to personal income*, and ratio of manufacturing and trade inventories to sales*. Based on revised data, the lagging index increased 0.2 percent in both May and April.

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 July 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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