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Economy in Brief

U.S. Leading Indicators Rise For A Third Month Signaling Economic Recovery
by Tom Moeller July 20, 2009

The Conference Board's Index of Leading Economic Indicators continued to suggest a pending economic recovery. The June composite index of leaders rose another 0.7% after gains of 1.3% (upwardly revised) and 1.0% during the prior two months. The combined 3.0% rise during those three months was the strongest since early 2002 while the index itself was at the highest level since last July. 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.

For the third straight month, nearly three quarters of the ten components of the leading index increased with the largest positive contributions coming from a steeper yield curve, higher building permits and higher stock prices. The money supply and consumer expectations made slight negative contributions.

Again suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2%, about as they have for three consecutive months. These compare with monthly declines of 0.6%-to-1.1% dating back to September. The negative contributions from lower employment and production have eased. The remaining two component series actually rose during June, led by very slight 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 sixth month in the last seven. The declines have been paced by a longer duration of unemployment, lower commercial and industrial loans and lower consumer installment credit. The ratio of coincident-to-lagging indicators (a measure of economic excess) rose m/m to the highest level since December.

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.

World Economic Outlook Update; Contractionary Forces Receding But Weak Recovery Ahead from the international Monetary Fund can be found here.

Business Cycle Indicators (%) June May April March 6-Month % (AR) 2008 2007 2006
Leading 0.7 1.3 1.0 4.1 -2.8 -0.3 1.5
Coincident -0.2 -0.3 -0.7 -5.9 -0.8 1.6 2.5
Lagging -0.2 -0.8 -0.6 -5.9 2.9 2.8 3.3
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