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Economy in Brief

Leading Economic Indicators Dip, March Revised Up
by Tom Moeller May 18, 2006

For April, the Conference Board's Composite Index of Leading Economic Indicators dipped 0.1% following a 0.4% March rise, initially reported as a 0.1% decline. Consensus expectations had been for a 0.1% April up tick.

Six month growth in the leaders fell to 2.9% from an upwardly revised 4.8% the prior month. During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.

The breadth of one month gain amongst the 10 components of the leading index halved to 35% in April. Over a six month span 80% of the index components have risen. A large positive contribution from vendor performance was offset by lower building permits, lower consumer sentiment and a lower real money supply.Most of the remaining index components had little m/m impact on the change in the leaders.

The spread between yields on the 10 year Treasury Note and Fed funds made a minimal 0.02 percentage point positive contribution to the leaders. 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% for the third consecutive month. All of the four component series rose last month and during the last six months. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP growth.

The lagging indicators increased 0.3% following a revised 0.1% March increase. Last month, 78.6% of the series' components rose while the ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, fell slightly.

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

Today's speech titled Basel II: Its Promise and Its Challenges by Federal reserve Board Chairman Ben S. Bernanke is available here

Business Cycle Indicators April Mar 6 Month Chg., AR 2005 2004 2003
Leading -0.1% 0.4% 2.9% 2.3% 7.4% 5.0%
Coincident 0.2% 0.2% 3.5% 2.2% 2.5% 0.4%
Lagging 0.3% 0.1% 1.6% 3.5% 0.0% -0.0%
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