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Economy in Brief

Rise in U.S. Leading Indicators The Largest Since Last Year
by Tom Moeller October 20, 2008

The composite index of leading economic indicators, reported by the Conference Board, increased 0.3% last month. The rise came after a revised August decline of 0.9% which was nearly double that reported initially. Despite the increase, the six-month percent change remained negative at -2.5% which was modestly improved from the low of -4.7% figure last October.

Last month's increase reflected sharp gains in the money supply, consumer expectations, the interest rate yield curve and the vendor performance components. Lower building permits, lower stock prices, higher claims for unemployment insurance and shorter weekly hours worked offset these gains with large negative contributions.

The breadth of one-month increase amongst the leaders' 10 components jumped to 60% but over a six-month period the breadth of gain amongst the components remained at its cycle low of 20%.

The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.

The coincident indicators fell 0.5% after a revised no change during August. Half of the components rose and half fell for the second month, yet over six months only a quarter rose. Over the last ten years there has been an 86% correlation between the y/y changes in the coincident indicators and real GDP.

The lagging index reversed the August increase and fell 0.2% as the average duration of unemployment fell sharply. The ratio of coincident to lagging indicators (a measure of economic excess) fell further to its lowest level since 1982.

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

This morning's testimony by Fed Chairman Ben S. Bernanke is available here.

Business Cycle Indicators (%) September August July June, 6 Month % (AR) 2007 2006 2005
Leading 0.3 -0.9 -0.7 -2.5 -0.4% 1.3% 2.7%
Coincident -0.5 0.0 -0.2 -1.7 1.7% 2.4% 2.5%
Lagging -0.2 0.2 0.5 0.4 2.9% 3.1% 3.1%
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