U.S. Leading Economic Indicators Again Up Slightly

The composite index of leading economic indicators, reported by the Conference Board, increased 0.1% last month after an unrevised 0.1% uptick in March. Consensus expectations had been for no change in the April leaders and the latest two gains followed consecutive declines during the five prior months.

The leaders may not yet indicate that the U.S. economy is entering recession. Since their peak in early 2006, the leading index has fallen 2.6%. Prior to the recession of 2001 the leading index declined a greater 3.7% over a shorter, roughly ten month span.

During the last ten years there has been a 59% correlation between the y/y change in the leading indicators index and the lagged change in real GDP.

The breadth of one month increase amongst the leaders' 10 components improved to 65% after its revised 50% breadth of March gain. Over a six month period the breadth of gain amongst the leaders' components also improved moderately but remained quite low at 40%.

Last month higher building permits, stock prices, a more positively sloped yield curve and lower claims for unemployment insurance made the largest positive contributions to the leader's rise. These gains were offset by lower weekly hours worked and lower consumer expectations.

The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found here.

The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.

The coincident indicators were unchanged for the second month in the last five. Over the last ten years there has been an 86% correlation between the y/y change in the coincident indicators and real GDP growth. Half of the coincident series components fell last month and the series is down 0.4% from its October peak.

The lagging index ticked up 0.1% after two months of 0.4% increase. The ratio of coincident to lagging indicators (a measure of economic excess) fell and was at its lowest since early 1991. Visit the Conference Board's site for coverage of leading indicator series from around the world.

Credit Access, Labor Supply, and Consumer Welfare from the Federal Reserve Bank of Richmond can be found here.

Business Cycle Indicators	April	March	Jan., 6 Month % (AR)	2007	2006	2005
Leading	0.1%	0.1%	-2.3%	-0.4%	1.3%	2.7%
Coincident	0.0%	0.0%	-0.7%	1.7%	2.4%	2.5%
Lagging	0.1%	0.4%	3.7%	2.9%	3.1%	3.1%