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U.S. Leading Economic Index Increases in October, Comments from Dr. Joe Webb

Friday, November 21, 2003

Press release from the issuing company

November 21, 2003 -- The Conference Board announced today that the U.S. leading index increased 0.4 percent, the coincident index increased 0.2 percent and the lagging index increased 0.2 percent in October. * The leading index increased by 0.4 percent in October. September’s originally-reported 0.2 percent decline was revised up to a 0.0 percent change. The coincident index increased moderately again in October, following an upwardly revised increase in September (which partly reflected the upward revision to payroll employment). * The leading index has now increased at a 5.7 percent annual rate over the last six months and this increase has been extremely widespread. Consistent with the pick-up in the leading index, the growth rate of the coincident index strengthened, and real GDP growth jumped to a 7.2 percent annual rate in the third quarter. * The continued growth in the leading index, despite recent declines in the money supply, suggests that strong economic growth should 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 average weekly initial claims for unemployment insurance (inverted), building permits, vendor performance, stock prices, index of consumer expectations, and interest rate spread. The negative contributors - beginning with the largest negative contributor – were real money supply*, manufacturers’ new orders for nondefense capital goods*, and manufacturers’ new orders for consumer goods and materials*. Average weekly manufacturing hours held steady in October. The leading index now stands at 113.6 (1996=100). Based on revised data, this index remained unchanged in September and increased 0.4 percent in August. During the six-month span through October, the leading index increased 2.8 percent, with all ten components advancing (diffusion index, six-month span equals 100 percent). Coincident Indicators.All 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, personal income less transfer payments*, industrial production, and manufacturing and trade sales*. The coincident index now stands at 116.0 (1996=100). This index increased 0.2 percent in September and held steady in August. During the six-month period through October, the coincident index increased 0.9 percent. Lagging Indicators. The lagging index stands at 97.5 (1996=100) in October, with five 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 CPI for services, ratio of consumer installment credit to personal income*, change in labor cost per unit of output* and ratio of manufacturing and trade inventories to sales*. The only negative contributor was commercial and industrial loans outstanding*. The average prime rate charged by banks held steady in October. Based on revised data, the lagging index decreased 0.6 percent in September and decreased 0.1 percent in August. ==== Comments from Dr. Joe Webb: "The strong economic news kept on coming this week. Housing starts befuddled the experts by increasing yet again (they forecast a decline, but it went up to the highest level since January 1986). Pundits were confused by a decrease in initial jobless claims of 15,000 (when they were expecting an increase of 4,000). On Thursday, the Conference Board's Leading Economic Indicators increased at twice the rate the pseudo-sages had predicted. One forecast they did get right was that Friday would follow Thursday, and that they would be pleased that their brutal week would be over." Premium Access Members at WhatTheyThink.com can view more analysis in Dr. Joe Webb’s weekly column on Friday, appropriately called “Fridays with Dr. Joe”.




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