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Economy in Brief

by U.S. Leading Economic Indicators RoseAugust 20, 2007 By Tom Moeller

The Conference Board reported that the composite index of leading economic indicators rose 0.4% during July following an unrevised 0.3% decline during June.

During the last ten years there has been a 59% correlation between the y/y change in the leading indicators and the lagged change in real GDP.

The breadth of one month gain amongst the 10 components of the leading index improved to 65%, its best since March.

Lower initial claims for unemployment insurance and improved vendor performance accounted for most the leader’s increase.

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 increased 0.2% after an upwardly revised 0.2% rise during June. The coincident index, made up of payroll employment, personal income, industrial production and business sales, has increased in every month since August 2005. Over the last ten years there has been a 91% correlation between the y/y change in the coincident indicators and real GDP growth.

The lagging index rose 0.2%. As a result the ratio of coincident to lagging indicators (a measure of economic excess) was unchanged. Visit the Conference Board's site for coverage of leading indicator series from around the world.

The Cost of Business Cycles for Unskilled Workers from the Federal Reserve Bank of New York can be found here.

Job-Finding and Separation Rates in the OECD from the Federal Reserve Bank of New York is available here.

Business Cycle Indicators July June Y/Y 2006 2005 2004
Leading 0.4% -0.3% 0.4% 1.2% 2.5% 7.1%
Coincident 0.2% 0.2% 2.0% 2.5% 2.1% 2.0%
Lagging 0.2% 0.5% 3.2% 3.0% 3.5% 0.6%
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