Conference Board U.S. Leading Economic Index up 0.1%

The Conference Board reported April 19 that the Composite Index of Leading Economic Indicators increased 0.1 percent in March, following a 0.6 percent decline in February and a 0.3 percent decline in January.

Says Ken Goldstein, labor economist at The Conference Board: "The Leading Economic Index was flat to declining in the first three months of the year. Its cumulative change over the past six months is now negative. The data may be pointing to a softer economy this summer. The housing and manufacturing sectors are going through a correction, despite a modest pickup in March. Business investment is another area of concern. Only the consumer sector, buoyed by income growth and positive attitudes, remains a strong point in the economic picture."

The Conference Board reports that the Coincident Index increased 0.1 percent in March, following a 0.2 percent increase in February, and a 0.1 percent decline in January. The Lagging Index increased 0.1 percent in March, following a 0.2 percent increase in February, and no change in January.

The Conference Board U.S. Business Cycle Indicators

The U.S. leading index increased 0.1 percent, the coincident index increased 0.1 percent and the lagging index increased 0.1 percent in March.

• The leading index increased slightly in March following two consecutive declines. In the six months from September to March, the leading index fell 0.1 percent (a minus-0.3 percent annual rate). In addition, the weaknesses among the indicators have become increasingly more widespread than the strengths over the past few months. In March, unemployment insurance claims (inverted), real money supply (M2) and average workweek in manufacturing made large positive contributions to the leading index, but these were partially offset by decreases in stock prices, consumer expectations, and the interest rate spread.
• The coincident index increased again in March. From September to March, the coincident index increased by 0.9 percent (a 1.8 percent annual rate). In March, the largest contribution came from non-agricultural employment, and the strengths of the coincident index have been more widespread than the weaknesses in recent months.
• The leading index is still about 0.9 percent below its most recent high in January 2006 and it is 0.8 percent below its March 2006 level. Despite a small pick-up in December, the leading index has been essentially flat since mid-2006. At the same time, real gross domestic product growth was at a 2.5 percent annual rate in the fourth quarter of 2006, following a 2.0 percent rate in the third quarter. The recent behavior of the leading and coincident indexes suggests that slow economic growth is likely to continue in the near term.

Leading indicators: Six of the 10 indicators that make up the leading index increased in March. The positive contributors – beginning with the largest positive contributor – were average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, real money supply, vendor performance, building permits, and manufacturers' new orders for consumer goods and materials. The negative contributors – beginning with the largest negative contributor – were stock prices, index of consumer expectations, interest rate spread and manufacturers' new orders for non-defense capital goods.

The leading index now stands at 137.4 (1996=100). Based on revised data, this index decreased 0.6 percent in February and decreased 0.3 percent in January. During the six-month span through March, the leading index decreased 0.1 percent, with three out of ten components advancing (diffusion index, six-month span equals 35 percent).

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

The coincident index now stands at 123.7 (1996=100). This index increased 0.2 percent in February and decreased 0.1 percent in January. During the six-month period through March, the coincident index increased 0.9 percent.

Lagging indicators: The lagging index stands at 127.9 (1996=100) in March, with four 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 labor cost per unit of output, ratio of manufacturing and trade inventories to sales, and the ratio of consumer installment credit to personal income. The negative contributors – beginning with the largest negative contributor – were average duration of unemployment (inverted), and the change in CPI for services. The average prime rate charged by banks held steady in March. Based on revised data, the lagging index increased 0.2 percent in February and remained unchanged in January.