New York, February 17--The Conference Board announced today that the U.S. leading index decreased 0.3 percent, the coincident index remained unchanged and the lagging index increased 0.3 percent in January.
The leading index declined in January, but this follows increases in the previous two months, and there were significant upward revisions to the leading index from August to December. In addition, there has been more widespread strength in the leading indicators in recent months, with weakness concentrated in vendor performance and the interest rate spread.
The coincident index, an index of current economic activity, held steady in January, and the strength in the coincident index continues to be widespread. At the same time, the growth rate of real GDP has been fluctuating around a 3.5 percent annual rate since the second quarter of 2004, including 3.1 percent in the fourth quarter.
The leading index was on a rising trend from early 2003 to the middle of 2004, but has now fluctuated around a flat trend over the last six or seven months (which is below its long-term trend of a 1.5 percent annual rate). The recent behavior of the leading index is consistent with the economy continuing to expand in the near term, but more slowly than its long-term average growth rate.
Four of the ten indicators that make up the leading index increased in January. The positive contributors - beginning with the largest positive contributor – were average weekly manufacturing hours, real money supply, building permits, and manufacturers’ new orders for nondefense capital goods. The negative contributors - beginning with the largest negative contributor – were vendor performance, index of consumer expectations, stock prices, interest rate spread, manufacturers’ new orders for consumer goods and materials. The contribution of average weekly initial claims for unemployment insurance (inverted) remained unchanged.
The leading index now stands at 115.6 (1996=100). Based on revised data, this index increased 0.3 percent in December and increased 0.3 percent in November. During the six-month span through January, the leading index decreased 0.3 percent, with five out of ten components advancing (diffusion index, six-month span equals fifty percent).
Three out of four indicators that make up the coincident index increased in January. The positive contributors to the index - beginning with the largest positive contributor - were employees on nonagricultural payrolls, manufacturing and trade sales, and industrial production. The negative contributor was personal income less transfer payments.
The coincident index now stands at 119.6 (1996=100). This index increased 1.1 percent in December and increased 0.1 percent in November. During the six-month period through January, the coincident index increased 1.8 percent.
The lagging index stands at 98.6 (1996=100) in January, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were commercial and industrial loans outstanding, average prime rate charged by banks, ratio of manufacturing and trade inventories to sales, and change in labor cost per unit of output. The negative contributor was ratio of consumer installment credit to personal income. The average duration of unemployment (inverted), and change in CPI for services held steady in January. Based on revised data, the lagging index decreased 0.7 percent in December and decreased 0.2 percent in November.
