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Released: Thursday, April 19, 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 increased 0.1 percent in March.

  • The leading index increased slightly in March following two consecutive declines. In the six months from September to March, the leading index fell 0.1 percent (a -0.3 percent annual rate). In addition, the weaknesses among the indicators have become increasingly more widespread than the strengths over the past few months. In March, unemployment insurance claims (inverted), real money supply (M2), and average workweek in manufacturing made large positive contributions to the leading index, but these were partially offset by decreases in stock prices, consumer expectations, and the interest rate spread.
  • The coincident index increased again in March. From September to March, the coincident index increased by 0.9 percent (a 1.8 percent annual rate). In March, the largest contribution came from nonagricultural employment, and the strengths of the coincident index have been more widespread than the weaknesses in recent months.
  • The leading index is still about 0.9 percent below its most recent high in January 2006 and it is 0.8 percent below its March 2006 level. Despite a small pick up in December, the leading index has been essentially flat since mid-2006. At the same time, real GDP growth was at a 2.5 percent annual rate in the fourth quarter of 2006, following a 2.0 percent rate in the third quarter. The recent behavior of the leading and coincident indexes suggests that slow economic growth is likely to continue in the near term.

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

The leading index now stands at 137.4 (1996=100). Based on revised data, this index decreased 0.6 percent in February and decreased 0.3 percent in January. During the six-month span through March, the leading index decreased 0.1 percent, with three out of ten components advancing (diffusion index, six-month span equals thirty five percent).

COINCIDENT INDICATORS. Three of the four indicators that make up the coincident index increased in March. The positive contributors to the index — beginning with the largest positive contributor — were employees on nonagricultural payrolls, personal income less transfer payments*, and manufacturing and trade sales*. The negative contributor was industrial production.The coincident index now stands at 123.7 (1996=100). This index increased 0.2 percent in February and decreased 0.1 percent in January. During the six-month period through March, the coincident index increased 0.9 percent.

LAGGING INDICATORS. The lagging index stands at 127.9 (1996=100) in March, with four 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*, ratio of manufacturing and trade inventories to sales*, and the ratio of consumer installment credit to personal income*. The negative contributors — beginning with the largest negative contributor — were average duration of unemployment (inverted), and the change in CPI for services. The average prime rate charged by banks* held steady in March. Based on revised data, the lagging index increased 0.2 percent in February and remained unchanged 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 March 18, 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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