U.S. Leading Index Improves for Third Straight Month
Friday, January 24, 2003
Editor's Note: For more about what this means to the industry, see today's column by Dr. Joe Webb. Jan. 23, 2003 -- The Conference Board announced today that the U.S. leading index increased by 0.1 percent, the coincident index held steady, and the lagging index decreased 0.3 percent in December. * After declining from May through September 2002, the leading index has now improved for three straight months, suggesting a stronger economic recovery in the first half of 2003. * The negative contribution from unemployment insurance claims in December was more than offset by the positive contributions from housing permits, average manufacturing workweek, and consumer expectations. The leading index has almost regained its level in May 2002, or when it started to decline. * The coincident index, a measure of current economic activity, was flat in each of the last three months of 2002. But it’s still 0.8 percent above its cyclical low reached in November 2001. Leading Indicators. Eight of the ten indicators that make up the leading index increased in December. The positive contributors to the index - beginning with the largest positive contributor - were building permits, average weekly manufacturing hours, index of consumer expectations, real money supply*, vendor performance, interest rate spread, manufacturers’ new orders for nondefense capital goods*, manufacturers’ new orders for consumer goods and materials*. The two negative contributors - from the larger negative contributor – were average weekly initial claims for unemployment insurance (inverted) and stock prices. The leading index now stands at 111.3 (1996=100). This index increased 0.5 percent in November and increased 0.2 percent in October. During the six-month span through December, the leading index increased 0.1 percent, with four of the ten components advancing (diffusion index, six-month span equals 40 percent). Coincident Indicators. Two of the four indicators that make up the coincident index increased in December. The positive contributors to the index - beginning with the larger positive contributor - were personal income less transfer payments* and manufacturing and trade sales*. Employees on nonagricultural payrolls and industrial production decreased in December. The coincident index now stands at 115.2 (1996=100). This index held steady in November and October. During the six-month period through November, the coincident index increased 0.1 percent. Lagging Indicators. The lagging index decreased 0.3 percent to 99.4 (1996=100) in December, with four of the seven components declining. The negative contributors to the index – beginning with the largest negative contributor – were average duration of unemployment, commercial and industrial loans outstanding*, average prime rate charged by banks, and ratio of consumer installment credit to personal income*. Change in CPI for services is the only component that increased this month. Change in labor cost per unit of output* and ratio of manufacturing and trade inventories to sales* held steady in December. The lagging index decreased 0.3 percent in November and held steady in October.