June 21, 2007 -- The Conference Board announced today that the U.S. leading index increased 0.3 percent, the coincident index increased 0.2 percent and the lagging index increased 0.2 percent in May.
* The May increase in the leading index reverses its April decline. And April's large decrease was revised up slightly due to data revisions in housing permits and manufacturers' new orders components. The leading index grew 0.3 percent from November to May (a 0.6 percent annual rate). In May, unemployment insurance claims (inverted) and stock prices made the largest positive contributions, followed by housing permits.
* The coincident index increased again in May. From November to May, the coincident index rose by 0.8 percent (a 1.6 percent annual rate). In May, employment made the largest contribution to the index. The coincident index grew at an average annual rate of about 2.5 percent in 2006, but in recent months, its growth has been fluctuating in the 1.5 to 2.0 percent range (annual rate).
* Following an essentially flat period in the second half of 2006, the leading index picked up somewhat in December, but this was followed by two consecutive declines. The leading index is still at the same level as in January 2007, and it is 0.3 percent above its May 2006 level. At the same time, real GDP grew only at a 0.6 percent annual rate in the first quarter of 2007, following a 2.5 percent rate in the fourth quarter of 2006. The recent performance of the leading index has been mixed with increases offsetting decreases and the number of components rising roughly equaling the number falling. The current behavior of the composite indexes suggests that economic growth is likely to continue, albeit at a slow pace, in the near term.
LEADING INDICATORS. Five of the ten indicators that make up the leading index increased in May. The positive contributors — beginning with the largest positive contributor — were average weekly initial claims for unemployment insurance (inverted), stock prices, building permits, index of consumer expectations, and vendor performance. The negative contributors — beginning with the largest negative contributor — were real money supply*, average weekly manufacturing hours and interest rate spread. The manufacturers' new orders for consumer goods and materials* and manufacturers' new orders for nondefense capital goods* held steady in May.
The leading index now stands at 138 (1996=100). Based on revised data, this index decreased 0.3 percent in April and increased 0.6 percent in March. During the six-month span through May, the leading index increased 0.3 percent, with four out of ten components advancing (diffusion index, six-month span equals forty five percent).
COINCIDENT INDICATORS. Three of the four indicators that make up the coincident index increased in May. 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 124 (1996=100). This index increased 0.1 percent in April and increased 0.2 percent in March. During the six-month period through May, the coincident index increased 0.8 percent.
LAGGING INDICATORS. The lagging index stands at 128.6 (1996=100) in May, with three of the seven components advancing. The positive contributors to the index — beginning with the largest positive contributor — were commercial and industrial loans outstanding*, average duration of unemployment (inverted) and ratio of consumer installment credit to personal income*. The negative contributors — beginning with the largest negative contributor — were change in CPI for services and change in labor cost per unit of output*. The ratio of manufacturing and trade inventories to sales* and average prime rate charged by banks* held steady in May. Based on revised data, the lagging index increased 0.2 percent in April and decreased 0.1 percent in March.