New York, NY, October 20, 2005--The Conference Board announced today that the U.S. leading index decreased 0.7 percent, the coincident index decreased 0.1 percent and the lagging index increased 0.2 percent in September.
The leading index decreased sharply in September as the economic impact of the hurricanes in the Gulf region began to be reflected in the component data. September’s decline in the leading index is its third consecutive fall. In September, the largest negative contributors to the leading index were the index of consumer expectations and initial claims for unemployment insurance. The growth rate of the leading index has been slowing down steadily from a peak growth of about 10.0 percent at the end of 2003, and it is now fluctuating in the 0.5 to 1.5 percent annual rate range in recent months.
The coincident index, a measure of current economic activity, decreased in September, and the slight increase in August was revised down to a slight decrease as actual data for personal income, which partially reflects the impact of Hurricane Katrina, became available. September’s decline in the coincident index is also partly due to the effect of the hurricanes as employment and industrial production registered decreases. The coincident index has been increasing at a relatively steady 2.5 percent annual rate since April 2003, but its growth rate has moderated in recent months.
The leading index has slowed down steadily since mid-2004. The impact of the hurricanes reinforced an already existing moderation in the leading index. Excluding the large positive contributions from the interest rate spread, the leading index has been fluctuating around a relatively flat trend throughout 2005. At the same time, the growth rate of real GDP has slowed to a 3.3 percent annual rate in the second quarter of 2005, down from a 4.3 percent rate in the first quarter of 2004. Although it is too soon to tell if the negative impact of the hurricanes on the leading index will be lasting, the recent behavior of the leading index is still consistent with the economy continuing to expand more moderately in the near term.
