Global Business Cycle Indicators
Press Release Archive
Released: Wednesday, November 21, 2007
The Conference Board announced today that the U.S. leading index decreased 0.5 percent, the coincident index remained unchanged and the lagging index increased 0.3 percent in October.
- The leading index decreased sharply in October, following a small increase in September. Most of the leading indicators contributed negatively to the index in October, led by large declines in housing permits, initial claims for unemployment insurance (inverted), and index of consumer expectations. Stock prices, real money supply (M2)*, and manufacturers' new orders for consumer goods and materials* were the only components that contributed positively to the index this month. The leading index fell 0.5 percent (a decline of 1.0 percent annual rate) from April to October, and the strengths among its components remained balanced with the weaknesses during the past six months.
- The coincident index was unchanged in October, for the first time in 2007, following steady increases since the beginning of the year. Employees on nonagricultural payrolls, personal income less transfer payments, and manufacturing trade and sales made small positive contributions to the index this month, but these gains were offset by the decline in industrial production. The coincident index increased 0.9 percent (a 1.8 percent annual rate) from April to October, which is modestly below the 1.1 percent pace in recent months (about a 2.3 percent annual rate). However, the strengths among the coincident indicators remain very widespread. In addition, the lagging index continued to increase in October, and as a result, the ratio of the coincident index to the lagging index continued to decrease. (This ratio tends to have long leads in the business cycle).
- The leading index has been essentially flat in 2007, continuing the yearlong pattern of alternating monthly increases and decreases, and it has gradually returned to its August 2006 level. Meanwhile, real GDP grew at a 3.9 percent annual rate in the third quarter, moderately stronger than the 2.2 percent average annual rate in the first half of the year. The behavior of the composite indexes so far continues to suggest that risks for economic weakness persist, but economic growth should continue in the near term, albeit at a slower pace.
LEADING INDICATORS. Three of the ten indicators that make up the leading index increased in October. The positive contributors — beginning with the largest positive contributor — were stock prices, real money supply*, and manufacturers' new orders for consumer goods and materials*. The negative contributors — beginning with the largest negative contributor — were building permits, average weekly initial claims for unemployment insurance (inverted), index of consumer expectations, vendor performance, average weekly manufacturing hours, manufacturers' new orders for nondefense capital goods*, and interest rate spread.
The leading index now stands at 136.9 (1996=100). Based on revised data, this index increased 0.1 percent in September and decreased 0.9 percent in August. During the six-month span through October, the leading index decreased 0.5 percent, with five out of ten components advancing (diffusion index, six-month span equals 50 percent).
COINCIDENT INDICATORS. Three of the four indicators that make up the coincident index increased in October. 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 125.1 (1996=100). This index increased 0.2 percent in September and increased 0.2 percent in August. During the six-month period through October, the coincident index increased 0.9 percent.
LAGGING INDICATORS. The lagging index stands at 129.9 (1996=100) in October, 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 CPI for services, change in labor cost per unit of output*, ratio of manufacturing and trade inventories to sales* and ratio of consumer installment credit to personal income*. The negative contributors — beginning with the larger negative contributor — were average duration of unemployment (inverted) and average prime rate charged by banks. Based on revised data, the lagging index increased 0.4 percent in September and increased 0.3 percent in August.
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 November 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.