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Released: Thursday, August 21, 2008

The Conference Board announced today that the U.S. leading index decreased 0.7 percent, the coincident index increased 0.1 percent and the lagging index increased 0.4 percent in July.

  • The leading index declined sharply in July, the second decrease in the index in the past three months. Building permits, stock prices, and weekly initial claims (inverted) made very large negative contributions to the index this month, more than offsetting positive contributions from the interest rate spread and consumer expectations. The six-month change in the index stands at -0.9 percent (about a -1.8 percent annual rate), up from the 3.4 percent annual rate of decline at the end of the first quarter of 2008. However, the weaknesses among the leading indicators continue to be very widespread.
  • The coincident index increased slightly in July, after remaining unchanged in June. Industrial production contributed positively to the index for the second consecutive month, while employment has continued to decline. The coincident index decreased 0.4 percent (about a -0.7 percent annual rate) from January to July, and all four components declined during this six-month period. In July, the lagging index rose more than the coincident index, and the coincident-to-lagging ratio decreased as a result.
  • After stabilizing in March and April, the leading index has reverted to the downward trend that began in the middle of 2007. In addition, the weaknesses among its components have remained widespread in recent months. Meanwhile, the coincident index has gradually decreased this year, and is slightly below its recent highest level in October 2007. Real GDP growth slowed to a 1.4 percent average annual rate in the first half of the year (including a 1.9 percent annual rate in the second quarter), sharply lower than the average annual rate of 2.3 percent in the second half of 2007. Taken together, the current behavior of the composite indexes suggests that the risks for further economic weakening in the near term remain elevated.

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

The leading index now stands at 101.2 (2004=100). Based on revised data, this index remained unchanged in June and decreased 0.1 percent in May. During the six-month span through July, the leading index decreased 0.9 percent, with three out of ten components advancing (diffusion index, six-month span equals 30 percent).

COINCIDENT INDICATORS. Three of the four indicators that make up the coincident index increased in July. The positive contributors to the index — beginning with the largest positive contributor — were personal income less transfer payments*, industrial production, and manufacturing and trade sales*. The negative contributor was employees on nonagricultural payrolls.

The coincident index now stands at 106.8 (2004=100). This index remained unchanged in June and decreased 0.2 percent in May. During the six-month period through July, the coincident index decreased 0.4 percent, with none of the components advancing (diffusion index, six-month span equals 0 percent).

LAGGING INDICATORS. The lagging index stands at 112.1 (2004=100) in July, with four 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), commercial and industrial loans outstanding*, and the ratio of consumer installment credit to personal income*. The negative contributor was the 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 July. Based on revised data, the lagging index remained unchanged in June and decreased 0.2 percent in May.

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 August 19, 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.

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.

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