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Benchmark Revisions - January 2008

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Released: Thursday, December 20, 2007

The next release of The Conference Board's Australia Leading Economic Indicators and Related Composite Indexes, scheduled for January 24, 2008, will incorporate benchmark revisions to the composite indexes. The composition of both the coincident (CEI) and leading economic indexes (LEI) for Australia will be revised and methodological changes will be made to the LEI effective with this release. For more details, please see page 3.

The Conference Board announced today that the leading index for Australia increased 0.9 percent and the coincident index remained unchanged in October.

  • The leading index increased again in October, but there were downward revisions to the leading index in the previous several months, as actual data for the third quarter of 2007 became available for the consumer price index (CPI), sales to inventories ratio, and gross operating surplus. Money supply and building approvals were the largest positive contributors to the index this month. With October's gain, the six-month growth rate of the leading index picked up to 2.3 percent (a 4.6 percent annual rate) from April to October, about the same average growth rate as in the first quarter and above the average growth rate of 1.6 percent in the third quarter. However, the strengths and weaknesses among the leading indicators have remained somewhat balanced in recent months.
  • The coincident index was unchanged in October, but the strengths among coincident indicators have continued to be more widespread than the weaknesses in the past several months. The six-month growth rate of the index has slowed somewhat to 1.0 percent (a 2.0 percent annual rate), slightly down from 1.2 percent (a 2.3 percent annual rate) at the end of the second quarter.
  • The leading index has continued to grow into the fourth quarter, but its growth rate has slowed slightly compared to early 2007, and the strengths among its components have become less widespread. At the same time, real GDP grew at a 4.1 percent annual rate in the third quarter of 2007 — the same average annualized growth rate as in the first half of the year and up from the 3.3 percent growth rate in the second half of 2006. The current behavior of the leading and coincident indexes so far suggests that moderately strong economic growth will likely continue in the near term.

LEADING INDICATORS. Four of the eight components in the leading index increased in October. The positive contributors to the index — in order from the largest positive contributor to the smallest — are money supply*, building approvals*, share prices, and gross operating surplus*. The (inverted) "medium-term" government bond yield, rural goods exports*, and yield spread declined, while the sales to inventories ratio* remained unchanged in October.

With the 0.9 percent increase in October, the leading index now stands at 174.1 (1990=100). Based on revised data, this index increased 0.4 percent in September and increased 0.5 percent in August. During the six-month period through October, the leading index increased 2.3 percent, and four of the eight components increased (diffusion index, six-month span equals 43.8 percent).

COINCIDENT INDICATORS. Three of the five components in the coincident index increased in October. The increases — in order from the largest positive contributor to the smallest — occurred in household gross disposable income*, employed persons, and retail trade. The (inverted) unemployment rate and industrial production* declined in October.

Holding steady in October, the coincident index now stands at 122.9 (1990=100). Based on revised data, this index increased 0.2 percent in both September and August. During the six-month period through October, the coincident index increased 1.0 percent, with four of the five components in the series making positive contributions (diffusion index, six-month span equals 80.0 percent).

DATA AVAILABILITY. The data series used by The Conference Board to compute the two composite indexes reported in the tables in this release are those available "as of" 10 A.M. ET on December 19, 2007. Some series are estimated as noted below.

NOTES: Series in the leading index that are based on The Conference Board estimates are sales to inventory ratio and gross operating surplus for private non-financial corporations, the implicit price index used to deflate rural goods exports and building approvals, and the CPI used to deflate money supply M3. Series in the coincident index that are based on The Conference Board estimates are industrial production and household disposable income. CPI was used to deflate retail trade.


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