New York NY, February 21, 2006--The Conference Board announced today that the U.S. leading index increased 1.1 percent, the coincident index increased 0.2 percent and the lagging index increased 0.7 percent in January.
The leading index increased sharply in January, and it has increased in five of the last six months. The leading index increased 2.3 percent from July 2005 to January 2006 (a 4.7 percent annual rate).
The strengths and weaknesses among the leading indicators were balanced through mid-2005, and the strength has become somewhat more widespread since August. The main contributors to January's large gain were initial claims for unemployment insurance (inverted), real money supply, and building permits.
The coincident index, a measure of current economic activity, increased again in January. It has been on a relatively steady upward trend since April 2003, but this trend moderated somewhat in the second half of 2005. The coincident index grew at almost a 2.1 percent rate from January 2005 to January 2006, down from about 3.0 percent in 2004, and strength among its components has been widespread in recent months.
The leading index grew strongly from mid-2003 to mid-2004, and it fluctuated around a more moderate upward trend since mid-2004. At the same time, real GDP growth slowed to a 1.1 percent annual rate in the fourth quarter of 2005 (according to advance estimates). The current behavior of the leading index suggests that the sluggish growth in the fourth quarter should not persist, and economic growth is likely to pick up in the near term.
Six 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 initial claims for unemployment insurance (inverted), real money supply*, building permits, vendor performance, stock prices, and interest rate spread. The negative contributor was index of consumer expectations. The average weekly manufacturing hours, manufacturers' new orders for consumer goods and materials*, and manufacturers' new orders for nondefense capital goods* held steady in January.
The leading index now stands at 140.1 (1996=100). Based on revised data, this index increased 0.3 percent in December and increased 0.9 percent in November. During the six-month span through January, the leading index increased 2.3 percent, with nine out of ten components advancing (diffusion index, six-month span equals ninety percent).
