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Economy in Brief

Leading Economic Indicators' Gain Light
by Tom Moeller January 23, 2006

The Composite Index of Leading Economic Indicators from the Conference Board rose 0.1% last month following an upwardly revised 0.9% November increase. Consensus expectations had been for a 0.2% gain.

The breadth of one month gain amongst the 10 components of the leading index slipped to 60% in December, though over six months the breadth of gain in the leaders rose to 80%, its best since last September. Easier vendor performance subtracted 0.3 percentage points from last month's rise in the leading index.

The .03 percentage point contribution from the spread between yields on the 10 year Treasury Note and the Fed funds rate was the smallest since a .38 point contribution last June. 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 0.2% following an upwardly revised 0.4% increase in November. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP.

The lagging indicators rose 0.1% following two months of strong gain. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, increased for only the second month in the last five.

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

Business Cycle Indicators Dec Nov 6 Month Chg., AR 2005 2004 2003
Leading 0.1% 0.9% 3.4% 2.1% 7.7% 5.1%
Coincident 0.2% 0.4% 1.3% 2.2% 2.7% 0.4%
Lagging 0.1% 0.5% 4.1% 3.6% -0.1% -0.1%
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