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Released: Thursday, September 18, 2008

The Conference Board announced today that the U.S. leading index decreased 0.5 percent, the coincident index decreased 0.1 percent and the lagging index increased 0.4 percent in August.

  • The leading index decreased again in August, the third decline in the index in the last four months, and it is 2.7 percent below its level one year ago. Building permits, the index of supplier deliveries and initial claims for unemployment insurance (inverted) made 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 leading index stands at -1.1 percent (a -2.1 percent annual rate), up slightly from -1.6 percent (about a -3.3 percent annual rate) for the previous six months. However, the weaknesses among the leading indicators have remained widespread over the past six months.
  • The coincident index also decreased in August, and July's small increase was revised down to no change. Industrial production dropped sharply this month, while employment has continued to fall. The six-month decline in the coincident index picked up to 0.4 percent (a -0.7 percent annual rate), from 0.2 percent (a -0.4 percent annual rate) for the previous six months, and the weaknesses among the coincident indicators remained widespread. In August, the lagging index continued to rise, and the coincident-to-lagging ratio continued to decline as a result.
  • The leading index has been generally falling for a year now, and the coincident index has been mildly declining since late 2007. Meanwhile, real GDP growth slowed to a 2.1 percent average annual rate for the first half of the year (including a 3.3 percent annual rate in the second quarter), from an average annual rate of 2.3 percent in the second half of 2007. All in all, the prolonged and widespread deterioration in the composite indexes suggests further weakening in economic conditions going forward.

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

The leading index now stands at 100.8 (2004=100). Based on revised data, this index decreased 0.7 percent in July and increased 0.1 percent in June. During the six-month span through August, the leading index decreased 1.1 percent, with two out of ten components advancing (diffusion index, six-month span equals 20 percent).

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

The coincident index now stands at 106.5 (2004=100). This index remained unchanged in July and decreased 0.2 percent in June. During the six-month period through August, the coincident index decreased 0.4 percent, with one out of four components advancing (diffusion index, six-month span equals 25 percent).

LAGGING INDICATORS. The lagging index stands at 112.6 (2004=100) in August, with two of the seven components advancing. The positive contributors to the index — beginning with the larger positive contributor — were commercial and industrial loans outstanding* and ratio of consumer installment credit to personal income*. The negative contributors — beginning with the largest negative contributor — were average duration of unemployment (inverted), 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 August. Based on revised data, the lagging index increased 0.4 percent in July and remained unchanged in June.

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 September 17, 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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