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Economy in Brief

U.S. Leading Economic Indicators Fell For Fifth Month
by Tom Moeller March 20, 2008

The Conference Board reported that the composite index of leading economic indicators fell 0.3% last month and matched Consensus expectations. A January decline of 0.1% reported initially was revised to show a larger 0.4% drop. It was the fifth consecutive monthly decline.

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 increase amongst the 10 components of the leading index remained at the January level of 45%. Over a six month period, the breadth of gain amongst the leaders components remained at 20%, the lowest level since 2002.

Last month higher claims for jobless insurance, lower building permits, faster vendor performance and lower stock prices made the largest negative contributions to the overall leading index.

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 were unchanged for the third consecutive month. Over the last ten years there has been an 86% correlation between the y/y change in the coincident indicators and real GDP growth. Half of the coincident series components fell.

The lagging index rose slightly as the average duration of unemployment rose and C&I loans increased. The ratio of coincident to lagging indicators (a measure of economic excess) fell yet again and was at its lowest since 1982.

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

On the Needed Quantity of Government Debt from the Federal Reserve Bank of Minneapolis is available here.

Business Cycle Indicators February January Y/Y 2007 2006 2005
Leading -0.3% -0.4% -1.5% -0.4% 1.2% 2.5%
Coincident 0.0% 0.0% 1.1% 1.8% 2.5% 2.1%
Lagging 0.2% 0.1% 2.3% 3.1% 3.0% 3.5%
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