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Economy in Brief

U.S. Leading Indicators Rise Sharply For A Second Month
by Tom Moeller June 18, 2009

The Conference Board's leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases recovered the declines during the prior several months and left the index at its highest level since last September. 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.

Nearly three quarters of the ten components of the leading index increased last month with the largest positive contributions coming from higher stock prices, a higher money supply, a more positively sloped interest rate yield curve and vendor performance (slower delivery speeds). Initial unemployment insurance claims, weekly hours worked and factory orders made negative contributions.

Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2% for the second month and that compared with 0.6% to 1.1% monthly declines since last September. The negative contributions from lower employment and production eased. Half of the four component series rose during May 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 fifth month in the last six. The ratio of coincident-to-lagging indicators (a measure of economic excess) was unchanged m/m at 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.

IMF Asked to Aid G-8 With Exit Strategies For Crisis Policies can be found here.

Business Cycle Indicators (%) May April March Feb. 6-Month % (AR) 2008 2007 2006
Leading 1.2 1.1 -0.3 2.4 -2.8 -0.3 1.5
Coincident -0.2 -0.3 -0.7 -6.4 -0.8 1.6 2.5
Lagging -0.2 -0.8 -0.6 -4.0 2.9 2.8 3.3
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