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Economy in Brief

Leading Indicators Down Again
by Tom Moeller May 19, 2005

The Composite Index of Leading Economic Indicators reported by the Conference Board fell for the fourth straight month in April. The 0.2% decline followed a downwardly revised 0.6% drop in March. Six-month growth in the leaders fell further to -1.0%. Growth in the leaders deeper than -2.5% preceded past US recessions.

During the last ten years there has been a 50% correlation between the six-month change in the leading indicators and the change in real GDP.

The breadth of one month gain amongst the 10 components of the leading index improved markedly to 50% from just 10% in March. Higher building permits and lower claims for unemployment insurance offset negative contributions from stock prices, the yield curve and the money supply.

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 rose 0.2% for the second month. Six-month growth in the index was 2.5% and during the last ten years there has been an 84% correlation between six month growth in the coincident indicators and two quarter growth in real GDP.

The lagging indicators rose 0.4% mostly due to higher C&I loans.

The ratio of the coincident to the lagging indicators which measures actual economic performance relative to excess fell for the third month this year.

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

New Economy-New Policy Rules? from the Federal Reserve Bank of St. Louis is available here.

Business Cycle Indicators April March 6-Month Chg 2004 2003 2002
Leading -0.2% -0.6% -0.5% 2.9% 1.3% 2.2%
Coincident 0.2% 0.2% 3.1% 2.6% 0.4% -0.5%
Lagging 0.4% -0.2% 0.4% -2.1% -1.9% -2.3%
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