New York, NY, March 18--The Conference Board said that the U.S. leading index increased 0.1 percent, the coincident index increased 0.4 percent and the lagging index increased 0.4 percent in February.
The leading index increased slightly in February following a decline in January. The leading index was on a rising trend from early 2003 to the middle of 2004, declined slightly for the next five months, and has now been increasing slightly since last October.
In addition, there has been about an equal mix of strengths and weaknesses among its components.
The coincident index, an index of current economic activity, increased in February, and the strength in the coincident index continues to be widespread. At the same time, real GDP increased at about a 4.0 percent average rate in the second half of 2004, up from 3.3 percent in the second quarter.
The leading index was on a rising trend until mid-2004, but this trend was interrupted by a decline from June to October 2004. This decline was similar in magnitude and duration to an earlier decline from May to October 2002.
The leading index has increased in three of the last four months, making it likely that the upward trend has not ended. The current behavior of the leading index (compared to its long-term trend of 1.5 percent) suggests the economy should continue to expand in the near term, but perhaps more slowly than its long-term average rate.
Leading Indicators.Five of the ten indicators that make up the leading index increased in February. The positive contributors - beginning with the largest positive contributor – were average weekly initial claims for unemployment insurance (inverted), stock prices, real money supply*, vendor performance, and manufacturers’ new orders for consumer goods and materials*.
The negative contributors - beginning with the largest negative contributor – were average weekly manufacturing hours, interest rate spread, building permits, and index of consumer expectations. The manufacturers’ new orders for nondefense capital goods* held steady in February.
The leading index now stands at 115.6 (1996=100). Based on revised data, this index decreased 0.3 percent in January and increased 0.3 percent in December. During the six-month span through February, the leading index decreased 0.1 percent, with five out of ten components advancing (diffusion index, six-month span equals fifty percent).
