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Released: Thursday, May 17, 2007

The Conference Board announced today that the U.S. leading index decreased 0.5 percent, the coincident index increased 0.2 percent and the lagging index increased 0.2 percent in April.

  • The leading index decreased in April, and the small March increase was revised up as actual data for manufacturing new orders for nondefense capital goods became available. The leading index declined or remained the same in three of the last six months. As a result, from October to April, the leading index fell 0.2 percent (a -0.4 percent annual rate). In April, housing permits made the largest negative contribution, but the weaknesses among the leading indicators have been somewhat more widespread than the strengths over the past few months.
  • The coincident index increased again in April, the third consecutive gain. From October to April, the coincident index rose by 0.7 percent (a 1.3 percent annual rate). In April, all four coincident indicators contributed to the gain and the largest contribution came from industrial production followed by personal income. The coincident index grew at an average annual rate of about 2.5 percent in 2006, but its growth has moderated to about a 1.5 to 2.0 percent average annual rate in the first four months of the year.
  • The leading index is 0.7 percent below its April 2006 level. In the second half of 2006, the leading index was essentially flat from July through November, followed by a small pick up in December, and it is now slightly below its October level. At the same time, real GDP grew only at a 1.3 percent annual rate (advance estimates) in the first quarter of 2007, following a 2.5 percent rate in the fourth quarter of 2006. The recent behavior of the composite indexes suggests that economic growth is likely to continue to be slow in the near term.

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

The leading index now stands at 137.3 (1996=100). Based on revised data, this index increased 0.6 percent in March and decreased 0.6 percent in February. During the six-month span through April, the leading index decreased 0.2 percent, with three out of ten components advancing (diffusion index, six-month span equals thirty percent.)

COINCIDENT INDICATORS. All four of the 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, personal income less transfer payments*, employees on nonagricultural payrolls and manufacturing and trade sales*.

The coincident index now stands at 123.8 (1996=100). This index increased 0.1 percent in March and increased 0.2 percent in February. During the six-month period through April, the coincident index increased 0.7 percent. The next release is scheduled for June 21, Thursday at 10 A.M. ET.

LAGGING INDICATORS. The lagging index stands at 128.1 (1996=100) in April, with three of the seven components advancing. The positive contributors to the index — beginning with the largest positive contributor — were change in CPI for services, average duration of unemployment (inverted), and ratio of consumer installment credit to personal income*. The negative contributors — beginning with the largest negative contributor — were commercial and industrial loans outstanding* and change in labor cost per unit of output*. The ratio of manufacturing and trade inventories to sales* and average prime rate charged by banks held steady in April. Based on revised data, the lagging index remained unchanged in March and increased 0.2 percent 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 16, 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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