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Economy in Brief

U.S. Leading Indicators Improve Sharply To The Highest Level Since November
by Tom Moeller May 21, 2009

Perhaps foreshadowing economic recovery was a report from the Conference Board showing that the April composite index of leading economic indicators jumped 1.0%. The rise recovered the declines during the prior several months and left the index at its highest level since last November.

Nearly three quarters of the ten components of the leading index increased last month with the largest contributions coming from higher stock prices, improved consumer expectations and a more positively sloped interest rate yield curve.

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.

Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell another 0.2% which was the smallest decline since last July. The negative contributions from lower employment and production eased. Half of the four component series rose during April led by gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.

In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the fourth month in the last five. The ratio of coincident-to-lagging indicators (a measure of economic excess) rose modestly to the highest level this year.

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.

Business Cycle Indicators (%) April March February Jan. 6-Month % (AR) 2008 2007 2006
Leading 1.0 -0.2 -0.5 -1.2 -2.8 -0.3 1.5
Coincident -0.2 -0.6 -0.6 -4.9 -0.8 1.6 2.5
Lagging -0.5 -0.5 -0.6 -1.9 2.9 2.8 3.3
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