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Released: Thursday, June 21, 2007

The Conference Board announced today that the U.S. leading index increased 0.3 percent, the coincident index increased 0.2 percent and the lagging index increased 0.2 percent in May.

  • The May increase in the leading index reverses its April decline. And April's large decrease was revised up slightly due to data revisions in housing permits and manufacturers' new orders components. The leading index grew 0.3 percent from November to May (a 0.6 percent annual rate). In May, unemployment insurance claims (inverted) and stock prices made the largest positive contributions, followed by housing permits.
  • The coincident index increased again in May. From November to May, the coincident index rose by 0.8 percent (a 1.6 percent annual rate). In May, employment made the largest contribution to the index. The coincident index grew at an average annual rate of about 2.5 percent in 2006, but in recent months, its growth has been fluctuating in the 1.5 to 2.0 percent range (annual rate).
  • Following an essentially flat period in the second half of 2006, the leading index picked up somewhat in December, but this was followed by two consecutive declines. The leading index is still at the same level as in January 2007, and it is 0.3 percent above its May 2006 level. At the same time, real GDP grew only at a 0.6 percent annual rate in the first quarter of 2007, following a 2.5 percent rate in the fourth quarter of 2006. The recent performance of the leading index has been mixed with increases offsetting decreases and the number of components rising roughly equaling the number falling. The current behavior of the composite indexes suggests that economic growth is likely to continue, albeit at a slow pace, in the near term.

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

The leading index now stands at 138 (1996=100). Based on revised data, this index decreased 0.3 percent in April and increased 0.6 percent in March. During the six-month span through May, the leading index increased 0.3 percent, with four out of ten components advancing (diffusion index, six-month span equals forty five percent).

COINCIDENT INDICATORS. Three of the four indicators that make up the coincident index increased in May. 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 124 (1996=100). This index increased 0.1 percent in April and increased 0.2 percent in March. During the six-month period through May, the coincident index increased 0.8 percent.

LAGGING INDICATORS. The lagging index stands at 128.6 (1996=100) in May, with three of the seven components advancing. The positive contributors to the index — beginning with the largest positive contributor — were commercial and industrial loans outstanding*, average duration of unemployment (inverted) and ratio of consumer installment credit to personal income*. The negative contributors — beginning with the largest negative contributor — were change in CPI for services 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 May. Based on revised data, the lagging index increased 0.2 percent in April and decreased 0.1 percent in March.

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 June 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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