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Released: Monday, July 21, 2008

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

  • The leading index declined for the second consecutive month in June, and May's small increase was revised down to a small decline as a result of data revisions in average work week in manufacturing and manufacturers' new orders for consumer goods and materials. Real money supply, stock prices and weekly initial claims made very large negative contributions to the index in June, more than offsetting positive contributions from building permits, the interest rate spread and supplier deliveries. The decline in the leading index has moderated somewhat, and the six-month change in the index has picked up to -0.9 percent (a -1.7 percent annual rate) in June, up from -1.7 percent (a -3.4 percent annual rate) at the end of the first quarter. However, the weaknesses among the leading indicators continue to be widespread.
  • The coincident index increased slightly in June, following a small decline in May. Industrial production contributed positively to the index this month, while employment has continued to decline. During the six-month period from December to June, the coincident index decreased 0.3 percent (a -0.6 percent annual rate), in line with the six-month change at the end of the first quarter, while the strengths among its components have been balanced with the weaknesses. The lagging index declined again in June, and the coincident to lagging ratio increased for the second straight month.
  • After pausing in March and April, the leading index resumed declining in May and June. In addition, the weaknesses among its components have remained widespread over the past six months. Meanwhile, the coincident index, a measure of current economic activity, has been flat in recent months, and is slightly below its level at the start of the year. Real GDP growth has fallen sharply, to a 0.8 percent average annual rate for the first quarter of 2008 and the fourth quarter of 2007, down from an average annual rate of 4.4 percent for the previous two quarters. All in all, the behavior of the composite indexes suggests that the risks for further weakening in the economy in the near term remain elevated.

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

The leading index now stands at 101.7 (2004=100). Based on revised data, this index decreased 0.2 percent in May and increased 0.1 percent in April. During the six-month span through June, the leading index decreased 0.9 percent, with three out of ten components advancing (diffusion index, six-month span equals 30 percent).

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

The coincident index now stands at 106.9 (2004=100). This index decreased 0.1 percent in May and remained unchanged in April. During the six-month period through June, the coincident index decreased 0.3 percent, with two out of four components advancing (diffusion index, six-month span equals 50 percent).

LAGGING INDICATORS. The lagging index stands at 111.5 (2004=100) in June, with one of the seven components advancing. The positive contributor to the index was the change in CPI for services. The negative contributors — beginning with the largest negative contributor — were commercial and industrial loans outstanding*, average duration of unemployment (inverted), change in labor cost per unit of output* and ratio of consumer installment credit to personal income*. The ratio of manufacturing and trade inventories to sales*, and average prime rate charged by banks* held steady in June. Based on revised data, the lagging index decreased 0.2 percent in May and decreased 0.1 percent in April.

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 July 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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