Global Business Cycle Indicators
Press Release Archive
Released: Thursday, February 21, 2008
The Conference Board announced today that the U.S. leading index decreased 0.1 percent, the coincident index increased 0.1 percent and the lagging index remained unchanged in January.
- The leading index declined for the fourth straight month in January. Stock prices were the largest negative contributor to the index this month, followed by housing permits. Money supply (real M2), index of consumer expectations, and initial claims for unemployment insurance (inverted) made positive contributions to the index. With this month's decline, the leading index has fallen 2.0 percent (a decline of 4.0 percent annual rate) from July 2007 to January 2008, the largest six-month decline in the index since early 2001. In addition, the weaknesses among its components have been more widespread than the strengths in recent months.
- The coincident index increased again in January, although its growth rate has slowed in recent months. The strengths among the coincident indicators have remained fairly widespread. For this month, positive contributions from personal income less transfer payments, real manufacturing and trade sales, and industrial production more than offset the small decline in nonagricultural payroll employment. Despite the gain in January, the six-month growth rate in the coincident index has slowed to 0.4 percent (a 0.8 percent annual rate) from July 2007 to January 2008, down from a 1.1 percent rate from January to July 2007 (a 2.3 percent annual rate). The lagging index remained unchanged in January, and as a result, the ratio of the coincident to lagging index increased slightly this month.
- The leading index has continued to decline since its most recent highest value reached in July 2007, and the weakness among the leading indicators has become more widespread. However, the coincident index has mostly increased during this period, although its growth rate has slowed considerably in recent months. At the same time, real GDP growth decreased to 0.6 percent in the fourth quarter of 2007, down from an average of about a 2.2 percent annual rate in the first half of 2007 and a 4.9 percent annual rate in the third quarter. Taken together, the current behavior of the composite indexes suggests increasing risks for further economic weakness, and that sluggish economic growth will likely 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*, average weekly initial claims for unemployment insurance (inverted), index of consumer expectations and vendor performance. The negative contributors — beginning with the largest negative contributor — were stock prices, building permits, manufacturers' new orders for nondefense capital goods*, and interest rate spread. Average weekly manufacturing hours, and manufacturers' new orders for consumer goods and materials* held steady in January.
The leading index now stands at 135.8 (1996=100). Based on revised data, this index decreased 0.1 percent in December and decreased 0.4 percent in November. During the six-month span through January, the leading index decreased 2.0 percent, with two out of ten components advancing (diffusion index, six-month span equals 20 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*, manufacturing and trade sales*, and industrial production. The negative contributor was employees on nonagricultural payrolls.
The coincident index now stands at 125.2 (1996=100). This index increased 0.1 percent in December and remained unchanged in November. During the six-month period through January, the coincident index increased 0.4 percent.
LAGGING INDICATORS. The lagging index stands at 130.7 (1996=100) in January, 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, ratio of manufacturing and trade inventories to sales*, ratio of consumer installment credit to personal income*, and change in labor cost per unit of output*. The negative contributors — beginning with the larger negative contributor — were average duration of unemployment (inverted) and the average prime rate charged by banks. Based on revised data, the lagging index increased 0.2 percent in December and increased 0.3 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, 2008. 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.
On February 1, 2008, a technical database error that affected two components of the LEI was corrected. The two components were 1) manufacturers' new orders for consumer goods and materials and 2) manufacturers' new orders for nondefense capital goods. As a result, the level of the index for July to December 2007 reported on January 18, 2008 was slightly lower, but the monthly change reported for December 2007 remained the same. The recent and historical cyclical behavior of the leading index was not affected by either the database error or its correction.
THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.