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Economy in Brief

U.S. Leading Indicators Fall To Cycle Low
by Tom Moeller March 19, 2009

The Conference Board reported that the February composite index of leading economic indicators fell 0.4% to a new low for this cycle. The decline followed a 0.1% January increase that was downwardly revised.

Six of the ten components of the leading index rose last month including a sharp steepening of the yield curve, but these gains were offset by materially higher claims for unemployment insurance, shorter hours worked, lower stock prices and reduced consumer expectations.

The breadth of one-month increase amongst the leaders' 10 components improved to 60% but over a six-month period the breadth of gain amongst the components fell to just 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.

Continuing to reflect economic recession, the coincident indicators dropped a sharp 0.4% and they are off 4.0% during the last year. Half of the four component series fell with outsized declines registered by employment and production. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.

The lagging index fell 0.4% after a 0.3% January decline. The ratio of coincident-to-lagging indicators (a measure of economic excess) was stable at its lowest level since 1975.

The Conference Board figures are available in Haver's BCI database. Visit the Conference Board's site for coverage of leading indicator series from around the world.

Risk management in the banking industry is yesterday's U.S. Senate testimony of Roger T. Cole, Director, Division of Banking Supervision and Regulation, U.S. Federal Reserve. It can be found here.

Business Cycle Indicators (%) February January December Nov. 6-Month % (AR) 2008 2007 2006
Leading -0.4 0.1 -0.1 -4.1 -2.8 -0.3 1.5
Coincident -0.4 -0.6 -0.7 -6.1 -0.8 1.6 2.5
Lagging -0.4 -0.3 -0.1 0.9 2.9 2.8 3.3
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