Global Business Cycle Indicators
Press Release Archive
Released: Thursday, October 20, 2005
Data for September are the first release of the U.S. Leading Economic Indicators and Related Composite Indexes to reflect the impact of the hurricanes, which hit the Gulf Coast region of the United States at the end of August and in September. As actual data for all components become available for September and October, the immediate impact of the hurricanes will be more fully reflected in the coming months.
The Conference Board announced today that the U.S. leading index decreased 0.7 percent, the coincident index decreased 0.1 percent and the lagging index increased 0.2 percent in September.
- The leading index decreased sharply in September as the economic impact of the hurricanes in the Gulf region began to be reflected in the component data. September’s decline in the leading index is its third consecutive fall. In September, the largest negative contributors to the leading index were the index of consumer expectations and initial claims for unemployment insurance. The growth rate of the leading index has been slowing down steadily from a peak growth of about 10.0 percent at the end of 2003, and it is now fluctuating in the 0.5 to 1.5 percent annual rate range in recent months.
- The coincident index, a measure of current economic activity, decreased in September, and the slight increase in August was revised down to a slight decrease as actual data for personal income, which partially reflects the impact of Hurricane Katrina, became available. September’s decline in the coincident index is also partly due to the effect of the hurricanes as employment and industrial production registered decreases. The coincident index has been increasing at a relatively steady 2.5 percent annual rate since April 2003, but its growth rate has moderated in recent months.
- The leading index has slowed down steadily since mid-2004. The impact of the hurricanes reinforced an already existing moderation in the leading index. Excluding the large positive contributions from the interest rate spread, the leading index has been fluctuating around a relatively flat trend throughout 2005. At the same time, the growth rate of real GDP has slowed to a 3.3 percent annual rate in the second quarter of 2005, down from a 4.3 percent rate in the first quarter of 2004. Although it is too soon to tell if the negative impact of the hurricanes on the leading index will be lasting, the recent behavior of the leading index is still consistent with the economy continuing to expand more moderately in the near term.
Leading Indicators. Four of the ten indicators that make up the leading index increased in September. The positive contributors – beginning with the largest positive contributor – were vendor performance, building permits, interest rate spread, and stock prices. The negative contributors – beginning with the largest negative contributor – were average weekly initial claims for unemployment insurance (inverted), index of consumer expectations, real money supply*, manufacturers’ new orders for nondefense capital goods*, and manufacturers’ new orders for consumer goods and materials*. The average weekly manufacturing hours held steady in September.
The leading index now stands at 136.8 (1996=100). Based on revised data, this index decreased 0.1 percent in August and decreased 0.1 percent in July. During the six-month span through September, the leading index increased 0.4 percent, with seven out of ten components advancing (diffusion index, six-month span equals seventy 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 largest positive contributor – were personal income less transfer payments*, and manufacturing and trade sales*. The negative contributors to the index – beginning with the largest negative contributor – were industrial production and employees on nonagricultural payrolls.
The coincident index now stands at 120.7 (1996=100). Based on revised data, this index decreased 0.1 percent in August and increased 0.2 percent in July. During the six-month period through September, the coincident index increased 0.8 percent.
Lagging Indicators. The lagging index stands at 120.3 (1996=100) in September, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were average duration of unemployment (inverted), average prime rate charged by banks, ratio of consumer installment credit to personal income*, and ratio of manufacturing and trade inventories to sales*. The negative contributors – beginning with the largest negative contributor – were commercial and industrial loans outstanding*, change in CPI for services, and change in labor cost per unit of output*. Based on revised data, the lagging index remained unchanged in August and increased 0.2 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 19, 2005. 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.
Effective with the January 22, 2004 release a programming error in the calculation of the leading index -- in place since January 2002 -- has been corrected. The cyclical behavior of the leading index was not affected by either the calculation error or its correction, but the level of the index in the 1959-1996 period is slightly higher.
THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.