Global Business Cycle Indicators
Press Release Archive
Released: Monday, November 21, 2005
The Conference Board announced today that the U.S. leading index increased 0.9 percent, the coincident index increased 0.1 percent, and the lagging index increased 0.8 percent in October.
- The leading index increased sharply in October offsetting the large decrease in September, which partly reflects the economic impact of the hurricanes which hit the Gulf region in late August and September. In addition, October’s increase was widespread among the leading indicators. The largest positive contributors to the leading index were (inverted) initial claims for unemployment insurance and average weekly hours in manufacturing, whereas the largest negative contributors were housing permits and stock prices.
- The coincident index, a measure of current economic activity, increased slightly in October. The coincident index has been increasing at a relatively steady 2.5 percent annual rate since April 2003, but its growth rate has moderated as personal income and industrial production registered declines in recent months. At the same time, real GDP grew at a 3.8 percent annual rate in the third quarter of 2005 (advance estimate), following a 3.3 percent rate in the second quarter.
- The leading index has slowed steadily since mid-2004 and it grew almost at a 1.0 percent annual rate since January. In the same period in 2004, it grew almost 4.0 percent. The leading index has been fluctuating around a relatively flat trend throughout 2005 and is now essentially at the same level as mid-2005. Although it is still difficult to distinguish between the impact of the hurricanes and overall economic conditions, the recent behavior of the leading index is still consistent with the economy continuing to expand more moderately in the near term.
Leading Indicators. Seven of the ten indicators that make up the leading index increased in October. The positive contributors – beginning with the largest positive contributor – were average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, vendor performance, real money supply*, interest rate spread, manufacturers’ new orders for nondefense capital goods*, and manufacturers’ new orders for consumer goods and materials*. The negative contributors were building permits and stock prices. The index of consumer expectations held steady in October.
The leading index now stands at 137.9 (1996=100). Based on revised data, this index decreased 0.8 percent in September and remained unchanged in August. During the six-month span through October, the leading index increased 1.2 percent, with seven out of ten components advancing (diffusion index, six-month span equals seventy percent).
Coincident Indicators. Three of the four indicators that make up the coincident index increased in October. The positive contributors to the index – beginning with the largest positive contributor – were industrial production, manufacturing and trade sales*, and employees on nonagricultural payrolls. The negative contributor was personal income less transfer payments*.
The coincident index now stands at 120.7 (1996=100). This index increased 0.3 percent in September and decreased 0.6 percent in August. During the six-month period through October, the coincident index increased 0.6 percent.
Lagging Indicators. . The lagging index stands at 121.2 (1996=100) in October, with five of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were commercial and industrial loans outstanding*, change in CPI for services, average prime rate charged by banks, average duration of unemployment (inverted), and ratio of manufacturing and trade inventories to sales*. The negative contributors – beginning with the largest negative contributor – were ratio of consumer installment credit to personal income* and change in labor cost per unit of output*. Based on revised data, the lagging index decreased 0.2 percent in September and increased 0.2 percent in August.
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 November 18, 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.