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Released: Wednesday, February 21, 2007

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

  • The leading index increased slightly in January and December's increase was revised upward as a result of data revisions in the manufacturers' new orders and building permits components. From July to January, the leading index rose 0.7 percent (a 1.5 percent annual rate), and the strengths and weaknesses among its components have been roughly balanced. In January, large positive contributions from real money supply (M2) and consumer expectations were offset by negative contributions from average weekly hours in manufacturing and building permits.
  • The coincident index increased again in January. From July to January, this index of current economic activity grew 0.9 percent (a 1.8 percent annual rate) and it is 1.8 percent above its January 2006 level. In addition, the strengths among the coincident indicators have been widespread in recent months.
  • The leading index is still slightly below its most recent high in January 2006 and it has been flat to declining in seven of the last twelve months, but its six-month growth rate has picked up in the last two months. At the same time, real GDP growth picked up to a 3.5 percent annual rate in the fourth quarter of 2006 according to advance estimates, following a 2.0 percent rate in the third quarter of 2006. The recent behavior of the leading index still suggests that slow to moderate 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 January. The positive contributors — beginning with the largest positive contributor — were real money supply*, index of consumer expectations, average weekly initial claims for unemployment insurance (inverted), and stock prices. The negative contributors — beginning with the largest negative contributor — were average weekly manufacturing hours, building permits, manufacturers' new orders for nondefense capital goods*, interest rate spread, vendor performance, and manufacturers' new orders for consumer goods and materials*.

The leading index now stands at 138.5 (1996=100). Based on revised data, this index increased 0.6 percent in December and decreased 0.1 percent in November. During the six-month span through January, the leading index increased 0.7 percent, with five out of ten components advancing (diffusion index, six-month span equals fifty percent).

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

The coincident index now stands at 123.3 (1996=100). This index increased 0.2 percent in December and increased 0.1 percent in November. During the six-month period through January, the coincident index increased 0.9 percent.

LAGGING INDICATORS. The lagging index stands at 127.6 (1996=100) in January, with one of the seven components advancing. The positive contributor to the index was ratio of consumer installment credit to personal income*. The negative contributors — beginning with the largest negative contributor — were commercial and industrial loans outstanding* and average duration of unemployment (inverted). The ratio of manufacturing and trade inventories to sales*,change in labor cost per unit of output*, average prime rate charged by banks, and change in CPI for services* held steady in January. Based on revised data, the lagging index increased 0.8 percent in December and increased 0.6 percent in November.

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 February 20, 2007. 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.

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.

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