Leading Economic Indicators Signal Sluggish Growth (Plus Comments from Dr. Joe Webb)
Press release from the issuing company
Apr. 22, 2003 -- (See comments from Dr. Joe Webb below) -- The Conference Board announced today that the U.S. leading index decreased 0.2 percent, the coincident index held steady, and the lagging index decreased 0.1 percent in March.
* The leading index declined for a second consecutive month in March, but the information available so far in April suggests that these declines will not continue. The leading index has been fluctuating around a flat trend since December 2001.
* The flatness in the leading index suggests that U.S. real GDP growth will stay in the 2-3% range for now. As long as economic growth is constrained in this range, the labor market cannot improve.
* The coincident index has been essentially flat in recent months with gains in income and sales offset by weakness in employment and industrial production. With economic growth at or slightly below potential, the coincident index is unlikely to grow strongly.
Leading Indicators. Half of the ten indicators that make up the leading index decreased in March. The negative contributors to the index - beginning with the largest negative contributor - were building permits, average weekly initial claims for unemployment insurance (inverted), interest rate spread, real money supply*, and index of consumer expectations. The positive contributors - from the largest positive contributor – were vendor performance, stock prices, manufacturers’ new orders for nondefense capital goods*, and manufacturers’ new orders for consumer goods and materials*. Average weekly manufacturing hours held steady in March.
The leading index now stands at 110.6 (1996=100). Based on revised data, this index decreased 0.5 percent in February and increased 0.1 percent in January. During the six-month span through March, the leading index increased 0.2 percent, with three of the ten components advancing (diffusion index, six-month span equals 35 percent).
Coincident Indicators. Two of the four indicators that make up the coincident index increased in March. The positive contributors to the index, beginning with the larger positive contributor - were personal income less transfer payments* and manufacturing and trade sales*. Industrial production and employees on nonagricultural payrolls declined in March.
The coincident index now stands at 115.3 (1996=100). Based on revised data, this index decreased 0.2 percent in February and increased 0.3 percent in January. During the six-month period through March, the coincident index increased 0.1 percent.
Lagging Indicators. The lagging index decreased 0.1 percent to 99.2 (1996=100) in March, with two of the seven components declining. The negative contributors to the index – beginning with the larger negative contributor – were commercial and industrial loans outstanding* and change in labor cost per unit of output. The positive contributors to the index were average duration of unemployment, change in CPI for services, and ratio of manufacturing and trade inventories to sales*. Ratio of consumer installment credit to personal income* and average prime rate charged by banks held steady in March. Based on revised data, the lagging index decreased 0.2 percent in February and increased 0.2 percent in January.
Free WTT Analysis: Below is a quick take on this news from Dr. Joe Webb. Premium Access Members can view more analysis in his weekly column on Friday, appropriately called “Fridays with Dr. Joe”.
"Leading economic indicators were weak, decreasing 0.2 percent. The Conference Board expects sluggish employment and economic growth. While there are already some signs that optimism and business conditions are improving slightly, this report holds little hope that there will be an economic surge on the basis of the positive news from Iraq. Some of the corporate profit announcements for the first quarter have been better than expected. I'm still getting the feeling that we are bottoming out, and starting a slow climb up. Remember that during an economic bottom, you do get many conflicting economic indicators, and strange as it seems, we should take some comfort in that."
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