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Economy in Brief

U.S. Leading Economic Indicators Down
by Tom Moeller December 20, 2007

For November, the Conference Board reported that the composite index of leading economic indicators fell by 0.4% after an unrevised 0.5% decline during October. A 0.3% decline had been expected.

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 gain amongst the 10 components of the leading index remained quite low at 30.0%. Over a six month period, the breadth of gain amongst the leaders components was 50% for the third month in a row.

Last month, virtually all of the leader's components fell significantly except hours worked and vendor performance.

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 recovered 0.2% after a downwardly revised 0.1% dip in October. 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 firmly for the fourth consecutive month due mostly to a higher CPI and higher C&I loans. The ratio of coincident to lagging indicators (a measure of economic excess) was unchanged at the lowest level since 1991.

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

Business Cycle Indicators November October Y/Y 2006 2005 2004
Leading -0.4% -0.5% -0.9% 1.2% 2.5% 7.1%
Coincident 0.2% -0.1% 1.7% 2.5% 2.1% 2.0%
Lagging 0.2% 0.3% 2.8% 3.0% 3.5% 0.6%
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