· The Conference Board reported that the composite index of leading economic indicators for October fell by 0.5% after a 0.1% decline during September which was revised from the slight rise reported initially. The latest was the fourth decline in the last five months.  

· During the last ten years there has been a 59% correlation between the y/y change in the leading indicators index and the lagged change in real GDP.

· The breadth of one month gain amongst the 10 components of the leading index again collapsed to 30.0% from the revised 60% during September. Over a six month period, the breadth of gain amongst the leaders components was 50% for the second month in a row. 

· Last month, virtually all of the leader's components fell significantly except new orders for consumer goods, M2 and stock prices which made very modest positive contributions.

· The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found here.

· The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated. 

· The coincident indicators was unchanged for the first month since a slight decline in January. Over the last ten years there has been a 86% correlation between the y/y change in the coincident indicators and real GDP growth.

· The lagging index rose firmly for the third consecutive month mostly due to higher C&I loans. The ratio of coincident to lagging indicators (a measure of economic excess) fell for the fifth month in the last six to the lowest level since 1991.

Business Cycle Indicators

October

September

Y/Y

2006

2005

2004

Leading

-0.5%

-0.1%

-0.5%

1.2%

2.5%

7.1%

Coincident

0.0%

0.2%

1.7%

2.5%

2.1%

2.0%

Lagging

0.3%

0.4%

3.3%

3.0%

3.5%

0.6%