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Economy in Brief

Leading Indicators Rose Again in July
by Tom Moeller August 18, 2005

The Composite Index of Leading Economic Indicators reported by the Conference Board rose 0.1% during July following a upwardly revised 1.2% jump in June. Six-month growth in the leaders improved to 2.2%, the best since February.

The breadth of one month gain amongst the 10 components of the leading index slipped to 65% from 85% during June. A wider interest rate spread between the yield on 10 Year Treasuries & Fed Funds, higher stock prices and fewer claims for unemployment insurance made the largest positive contributions to the leader's July increase.

The method of calculating the contribution to the index from the interest rate yield spread 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 rose 0.1% (2.6% y/y) with each of the four components up during the last three months.

The lagging indicators rose 0.3%, the same as during the prior month.

As higher short term interest rates and faster growth in the services CPI have raised the lagging indicators versus earlier declines, the ratio of coincident to lagging indicators has moved sideways this year and is down sharply from the December '04 peak. The ratio measures actual economic performance against economic excess.

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

The July 2005 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board can be found here.

Business Cycle Indicators July June 6-Month Chg 2004 2003 2002
Leading 0.1% 1.2% 2.2% 7.7% 5.1% 5.0%
Coincident 0.1% 0.3% 2.2% 2.7% 0.4% -0.6%
Lagging 0.3% 0.3% 3.4% -0.1% -0.1% -0.7%
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