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Economy in Brief

Leading Economic Indicators Nudged Higher
by Tom Moeller July 20, 2006

The Conference Board reported that the composite index of leading economic indicators ticked up 0.1% in June, the first increase in three months, and followed an unrevised 0.6% decline the prior month. Consensus expectations had been for a 0.2% increase.

Six month growth in the leaders fell to -0.6%, its weakest since early 2001. 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 improved sharply to 65% in June but over a six month span only 50% of the index components rose, the weakest breadth of six month gain since early 2005. In June, positive contributions from the money supply, consumer expectations, hours worked & jobless claims were offset by lower stock prices, vendor performance and building permits .

The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate 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% and during the last one & six months all of the coincident series rose. Over the last ten years there has been a 69% correlation between the change in the coincident indicators and real GDP growth.

The lagging indicators jumped 0.6%. During June nearly all of the series' components rose but during the last six months 42.9% rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, fell for the third consecutive month.

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

Business Cycle Indicators June May 6 Month Chg., AR 2005 2004 2003
Leading 0.1% -0.6% -0.6% 2.3% 7.4% 5.0%
Coincident 0.2% 0.1% 2.1% 2.2% 2.5% 0.4%
Lagging 0.6% 0.2% 3.1% 3.5% 0.0% -0.0%
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