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Economy in Brief

U.S. Leading Economic Indicators Rose
by Tom Moeller October 18, 2007

In September, the composite index of leading economic indicators gained back 0.3% of the prior month's 0.8% decline. It was revised from the initial report of a 0.6% decline, according to the Conference Board.

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

The breadth of one month gains amongst the 10 components of the leading index improved to 75.0% from the abysmal 20% during August. Over a six month period, the breadth of gain amongst the leaders components was stable for the third month at 60%.

Higher stock prices, vendor performance and capital good orders made the largest positive contributions to the index's rise, offsetting a huge negative .20% contribution from lower 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% after a 0.1% rise during August. Over the last ten years there has been a 86% correlation between the y/y change in the coincident indicators and real GDP growth.

The lagging index rose a firm 0.5% during August mostly due to higher C&I loans and a longer duration of unemployment. Nevertheless, the ratio of coincident to lagging indicators (a measure of economic excess) fell to its lowest level since 1991.

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

Business Cycle Indicators September August Y/Y 2006 2005 2004
Leading 0.3% -0.8% 0.2% 1.2% 2.5% 7.1%
Coincident 0.2% 0.1% 2.0% 2.5% 2.1% 2.0%
Lagging 0.5% 0.3% 3.6% 3.0% 3.5% 0.6%
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