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Economy in Brief

Leading Indicators Fell
by Tom Moeller July 22, 2004

The July Composite Index of Leading Economic Indicators reported by the Conference Board fell 0.3%. Only a 0.1% reduction had been expected. June's 0.2% fall was revised to 0.1%.

Among the 10 components, six contributed negatively in July and four positively. Financial indicators, stock prices and the yield curve, pulled the index down a total of 0.29%. Building permits gave the largest boost, 0.26%.

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

The coincident indicators ticked 0.1% higher, while the original 0.1% rise in June was revised to zero change. In this July report, employment and production both contributed to the modest rise. The lagging index gained 0.5%, also moved by financial components: the prime rate rose 25 basis points and bank loans to business rose by their largest amount since early 2000.

Lagging indicators appear to be most useful in confirming the development of business cycle expansions. As seen in the accompanying graph, the index tends to continue falling even after the economy has begun to recover, so it is the upturn in the "laggers" that indicates the maturing of the expansion process.

Visit the Conference Board's site for coverage of leading indicator series from around the world.

Business Cycle Indicators July June May Y/Y 2003 2002 2001
Leading -0.3% -0.1% 0.4% 2.8% 1.3% 2.2% -0.8%
Coincident 0.1% 0.0% 0.3% 2.4% 0.4% -0.5% -0.5%
Lagging 0.5% 0.0% 0.1% -1.3% -2.2% -2.8% -1.4%
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