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Released: Monday, October 20, 2008

The Conference Board announced today that the U.S. leading index increased 0.3 percent, the coincident index decreased 0.5 percent and the lagging index decreased 0.2 percent in September.

  • The leading index increased in September, the first increase in the last five months. Real money supply, consumer expectations, the interest rate spread, and the index of supplier deliveries all made large positive contributions to the index in September, more than offsetting the negative contributions from building permits, stock prices, initial claims for unemployment insurance (inverted) and the average workweek in manufacturing. From March to September, the leading index decreased 1.3 percent (a -2.5 percent annual rate), declining modestly slower than the 1.7 percent decrease (a -3.4 percent annual rate) that prevailed in the previous six months. However, the weaknesses among the leading indicators have remained widespread over the past six months.
  • The coincident index decreased sharply in September and it has declined or held steady since October 2007. Industrial production fell steeply this month, while employment continued to decline. The six-month decline in the coincident index has picked up to 0.8 percent (a -1.7 percent annual rate), from a decrease of 0.3 percent (a -0.6 percent annual rate) in the previous six months, while the weaknesses among the coincident indicators remained very widespread. In September, the coincident index decreased more than the lagging index, and the coincident-to-lagging ratio continued to decline as a result.
  • With consistently widespread weakness among its components, the leading index has been falling since July 2007. Following the leading index, the coincident index, a monthly measure of current economic conditions, has also been decreasing, and its rate of decline has accelerated in recent months. Meanwhile, real GDP growth slowed to a 1.8 percent average annual rate in the first half of the year, down from an average annual rate of 2.3 percent in the second half of 2007. Taken together, the behavior of the composite indexes suggests that the economy is unlikely to improve in the near term.

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

The leading index now stands at 100.6 (2004=100). Based on revised data, this index decreased 0.9 percent in August and decreased 0.7 percent in July. During the six-month span through September, the leading index decreased 1.3 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 September. 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 (2004=100). This index remained unchanged in August and decreased 0.2 percent in July. During the six-month period through September, the coincident index decreased 0.8 percent, with one out of four components advancing (diffusion index, six-month span equals 25 percent).

LAGGING INDICATORS. The lagging index stands at 112.2 (2004=100) in September, 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 the ratio of manufacturing and trade inventories to sales*. 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 average prime rate charged by banks, and ratio of consumer installment credit to personal income* held steady in September. Based on revised data, the lagging index increased 0.2 percent in August and increased 0.5 percent in July.

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 October 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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