U.S. Leading Economic Index Increases, The Conference Board Reports

The Conference Board reports today that the Composite Index of Leading Economic Indicators increased 0.5% in November, following a 1.0% increase in October, and a 0.7% decline in September. With this increase, the index now stands at 138.8, up from 138.1 in October. Says Ken Goldstein, Labor Economist at The Conference Board: “The Leading Economic Indicators have been anything but consistent — flat to declining from July through September, and recovering in October and November. The recent two-month snap back in the leading indicators raises the probability of the coincident economic index remaining on a moderate rising trend through early spring. High and potentially rising energy prices are one consideration in this outlook. A second consideration is the effect of spillover — that is, prices for derivative materials (rubber, paint, plastic and chemicals) are starting to increase faster now. Rising costs and questions about whether they will be matched by price hikes are also a factor in how fast the economy grows this spring.”

The Conference Board reports that the Coincident Index increased 0.2% in November, following a 0.2% increase in October and a 0.2% increase in September. The Lagging Index rose 0.6% in November, following a 0.7% increase in October, and a 0.1% increase in September.

Next month’s release of the U.S. LEADING ECONOMIC INDICATORS AND RELATED COMPOSITE INDEXES will incorporate annual benchmark revisions to the composite indexes which will bring them up-to-date with revisions in the source data. The indexes are updated throughout the year, but only for the previous six months. Data revisions that fall outside of the moving six-month window are not incorporated until the January release of each year when an annual benchmark revision is made and the entire histories of the indexes are recomputed.

For more information, visit our web site at http://www.conference-board.org/economics/bci/

The Conference Board announced today that the U.S. leading index increased 0.5 percent, the coincident index increased 0.2 percent, and the lagging index increased 0.6 percent in November.

• The leading index increased again in November, following a large gain in October. With November’s increase, the six month growth rate of the leading index picked up to about a 3.4 percent annual rate, up from an average of about 1.9 percent (annual rate) in the first half of 2005, and strength among the leading indicators has been widespread since August. The largest contributor to November’s gain was initial claims for unemployment insurance (inverted), which returned to levels seen before the hurricanes hit the gulf region.

• The coincident index, a measure of current economic activity, increased again in November. The coincident index has been increasing at a relatively steady 2.5 percent annual rate since April 2003, but its growth rate has moderated since June 2005. Over the last six months, the main source of growth in the coincident index has been from industrial production and employment; whereas, the personal income and manufacturing and trade sales components have made more modest positive contributions. At the same time, real GDP grew at a 4.1 percent annual rate in the third quarter of 2005, following a 3.3 percent rate in the second quarter.

• The leading index has been fluctuating around a relatively flat trend since mid-2004, following a strong upward trend from mid-2003 to mid- 2004. Despite the slowing growth of the leading index, the strengths and weaknesses were well balanced through mid-2005, and strength among the leading indicators has become somewhat more widespread in recent months. It is too early to tell whether the slowdown in the leading index has ended, and the recent behavior of the leading index is still consistent with the economy continuing to expand moderately in the near term.

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

The next release is scheduled for January 23, Monday at 10 A.M. ET.

The leading index now stands at 138.8 (1996=100). Based on revised data, this index increased 1.0 percent in October and decreased 0.7 percent in September. During the six-month span through November, the leading index increased 1.7 percent, with eight out of ten components advancing (diffusion index, six-month span equals eighty percent).