Global Business Cycle Indicators

Monday, November 20, 2006

The Conference Board announced today that the U.S. leading index increased 0.2 percent, the coincident index increased 0.1 percent and the lagging index increased 0.2 percent in October.
The leading index increased again in October, and there was an upward revision to September's small increase. From April to October, the leading index fell by 0.2 percent (a -0.4 percent annual rate). Housing permits continued to make the largest negative contribution to the leading index in this period, followed by vendor performance, offsetting large positive contributions from real money supply (M2) and consumer expectations. Strengths and weaknesses have been roughly balanced among the leading indicators in recent months.
The coincident index increased in October, and September's unchanged value was revised upward as a result of data revisions in all its components. This measure of current economic activity has been increasing steadily since September 2005, although its growth moderated in recent months. From April to October, the coincident index grew 1.0 percent (a 2.0 percent annual rate).
The leading index has been fluctuating around a slightly downward short-term trend in recent months, with increases in September and October, but declines in July and August. As a result, it has fallen 0.6 percent below its most recent high reached in January. At the same time, real GDP growth slowed to a 1.6 percent (annual) rate in the third quarter, following a 5.6 percent gain in the first quarter and a 2.6 percent gain in the second quarter. The current behavior of the leading index suggests that slow economic growth is likely to continue in the near term.

LEADING INDICATORS
Six of the ten indicators that make up the leading index increased in October. The positive contributors - beginning with the largest positive contributor - were real money supply*, index of consumer expectations, stock prices, average weekly manufacturing hours, manufacturers' new orders for consumer goods and materials*, and average weekly initial claims for unemployment insurance (inverted). The negative contributors - beginning with the largest negative contributor - were vendor performance, building permits, manufacturers' new orders for nondefense capital goods*, and the interest rate spread.
The leading index now stands at 138.3 (1996=100). Based on revised data, this index increased 0.4 percent in September and decreased 0.3 percent in August. During the six-month span through October, the leading index decreased 0.2 percent, with five out of ten components advancing (diffusion index, six-month span equals fifty-five 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 employees on nonagricultural payrolls, industrial production, and manufacturing and trade sales*. Personal income, less transfer payments remained the same.
The coincident index now stands at 123.7 (1996=100). This index increased 0.2 percent in September and increased 0.2 percent in August. During the six-month period through October, the coincident index increased 1.0 percent.

LAGGING INDICATORS
The lagging index stands at 124.1 (1996=100) in October, 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), change in labor cost per unit of output*, and ratio of consumer installment credit to personal income*. The negative contributors - beginning with the largest negative contributor - were commercial and industrial loans outstanding* and change in CPI for services. The ratio of manufacturing and trade inventories to sales* and average prime rate charged by banks* held steady in October. Based on revised data, the lagging index increased 0.2 percent in September and remained unchanged in August.