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Released: Thursday, December 18, 2008

Next month's release will incorporate annual benchmark revisions to the composite indexes, which bring them up-to-date with revisions in the source data. These revisions do not change the cyclical properties of the indexes. The indexes are updated throughout the year, but only for the previous six months. Data revisions that fall outside of the moving six-month window are not incorporated until the benchmark revision is made and the entire histories of the indexes are recomputed. As a result, the revised indexes will no longer be directly comparable to those issued prior to the benchmark revision. For more information, please visit us here at http://www.conference-board.org/economics/bci/ or contact us at indicators@conference-board.org.

The Conference Board announced today that the U.S. leading index decreased 0.4 percent, the coincident index decreased 0.3 percent and the lagging index increased 0.1 percent in November.

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  • The leading index continued to fall in November, due mainly to large declines in building permits, stock prices, and initial unemployment claims, which offset the continued positive contributions from real money supply (M2) and the yield spread. Without the very large increases in inflation-adjusted money supply since September, the leading index would have been significantly weaker. The six-month change in the leading index has continued to fall — to -2.8 percent (a -5.6 percent annual rate) in the period through November, down from -0.9 percent (a -1.7 percent annual rate) during the previous six months. In addition, the weaknesses among the leading indicators have remained widespread in recent months.
  • The coincident index also fell in November, driven by a very large contraction in employment and a smaller drop in industrial production. The lagging index rose slightly this month, and the coincident-to-lagging ratio decreased as a result (the ratio tends to have long leads in the business cycle). Since May, the coincident index has decreased 1.8 percent (a -3.5 percent annual rate), sharply faster than the decline of 0.4 percent (a -0.7 percent annual rate) from November 2007 to May 2008, while the weaknesses among its components have remained very widespread.
  • The leading and coincident economic indexes have been falling for more than a year now, and the breadth of their deterioration has been very widespread. The rates of their six-month decline have picked up in recent months and are now the largest since 1991. Meanwhile, real GDP contracted at a 0.5 percent annual rate in the third quarter of 2008, down from a 1.8 percent average annual rate of growth for the first half of the year. All in all, the continued widespread deterioration in the composite indexes suggests that the recession that began in December 2007 will continue into the new year, and the contraction in economic activity could deepen further in the near term.

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

The leading index now stands at 99.0 (2004=100). Based on revised data, this index decreased 0.9 percent in October and remained unchanged in September. During the six-month span through November, the leading index decreased 2.8 percent, with three out of ten components advancing (diffusion index, six-month span equals 30 percent).

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

The coincident index now stands at 104.9 (2004=100). This index increased 0.3 percent in October and decreased 1.0 percent in September. During the six-month period through November, the coincident index decreased 1.8 percent, with none of the four components advancing (diffusion index, six-month span equals 12.5 percent).

LAGGING INDICATORS. The lagging index stands at 113.7 (2004=100) in November, with three of the seven components advancing. The positive contributors to the index — beginning with the largest positive contributor — were average duration of unemployment (inverted), commercial and industrial loans outstanding* and ratio of consumer installment credit to personal income*. The negative contributors — beginning with the largest negative contributor — were change in CPI for services, average prime rate charged by banks, and change in labor cost per unit of output*. The ratio of manufacturing and trade inventories to sales* held steady in November. Based on revised data, the lagging index remained unchanged in October and increased 0.6 percent in September.

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 December 16, 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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