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Released: Thursday, December 21, 2006

Next month's release of the U.S. LEADING ECONOMIC INDICATORS AND RELATED COMPOSITE INDEXES will incorporate annual benchmark revisions to the composite indexes which will 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.

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 0.5 percent in November.

  • The leading index increased for the third consecutive month in November. From May to November, the leading index rose 0.2 percent (a 0.4 percent annual rate). Initial claims for unemployment insurance (inverted) and building permits made the largest negative contributions to the leading index in November. In addition, strengths and weaknesses remained roughly balanced among the leading indicators in recent months.
  • The coincident index increased again in November. This measure of current economic activity has been growing steadily, although its growth moderated somewhat in recent months. From May to November, the coincident index grew at a 1.1 percent rate (a 2.1 percent annual rate). In addition, the strengths among the coincident indicators have been very widespread in recent months. At the same time, real GDP growth slowed to a 2.2 percent (annual) rate in the third quarter, following a 5.6 percent gain in the first quarter and a 2.6 percent gain in the second quarter.
  • The leading index was fluctuating around a slightly downward short-term trend since January, and, despite three consecutive gains, it is still 0.6 percent below its most recent high reached at the beginning of the year. The decline in the growth rate of the leading index since the beginning of the year appears to have moderated in recent months, but the strength among the leading indicators has not been widespread. The recent behavior of the leading index so far still suggests that slow economic growth is likely to continue in the near term.

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

The leading index now stands at 138.2 (1996=100). Based on revised data, this index increased 0.1 percent in October and increased 0.4 percent in September. During the six-month span through November, the leading index increased 0.2 percent, with six 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, manufacturing and trade sales* and personal income less transfer payments*.

The coincident index now stands at 124.0 (1996=100). This index increased 0.2 percent in October and increased 0.1 percent in September. During the six-month period through November, the coincident index increased 1.1 percent.

LAGGING INDICATORS. The lagging index stands at 124.9 (1996=100) in November, 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*, change in labor cost per unit of output*, average duration of unemployment (inverted), ratio of manufacturing and trade inventories to sales* and ratio of consumer installment credit to personal income*. The only negative contributor was the change in CPI for services. The average prime rate charged by banks* held steady in November. Based on revised data, the lagging index increased 0.2 percent in October and increased 0.2 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 21, 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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