The coincident index also increased slightly in May, the first increase in seven months, and the index was revised down modestly for March and April as new component data became available. The growth rate of the coincident index stands at -0.4 percent (a -0.7 percent annual rate) in the six-month period though May, down from 0.3 percent (a 0.6 percent annual rate) from July 2007 to January 2008, and the weaknesses among its components have remained widespread in recent months. The lagging index increased this month, and the coincident to lagging ratio has continued to decline.
The leading index has risen in the past two months, following a steady decline that began in the middle of last year. However, the number of components that are falling continues to be greater than the number of components that are rising over the past six months. Meanwhile, the coincident index has decreased modestly in recent months, after rising steadily for the most part of 2006 and through late 2007. Real GDP expanded at an average annual rate of 0.7 percent for the first quarter of 2008 and the fourth quarter of 2007, down from an average annual rate of 4.4 percent for the previous two quarters. Taken together, the behavior of the composite indexes so far continues to suggest weak economic activity in the near term.
LEADING INDICATORS
Four of the ten indicators that make up the leading index increased in May. The positive contributors - beginning with the largest positive contributor - were the interest rate spread, stock prices, manufacturers' new orders for consumer goods and materials, and manufacturers' new orders for nondefense capital goods. The negative contributors - beginning with the largest negative contributor - were real money supply, index of consumer expectations, building permits, index of supplier deliveries (vendor performance), and average weekly initial claims for unemployment insurance (inverted). Average weekly manufacturing hours held steady in May.
The leading index now stands at 102.1 (2004=100). Based on revised data, this index increased 0.1 percent in April and remained unchanged in March. During the six-month span through May, the leading index decreased 0.7 percent, with three out of ten components advancing (diffusion index, six-month span equals 30 percent).
COINCIDENT INDICATORS
Two of the four indicators that make up the coincident index increased in May. The positive contributors to the index - beginning with the larger positive contributor - were personal income less transfer payments and manufacturing and trade sales. The negative contributors were industrial production and employees on nonagricultural payrolls.
The coincident index now stands at 106.8 (2004=100). This index decreased 0.1 percent in April and decreased 0.1 percent in March. During the six-month period through May, the coincident index decreased 0.4 percent.
LAGGING INDICATORS
The lagging index stands at 112.4 (2004=100) in May, with four of the seven components advancing. The positive contributors to the index - beginning with the largest positive contributor - were average duration of unemployment (inverted), change in CPI for services, ratio of manufacturing and trade inventories to sales*, and ratio of consumer installment credit to personal income. The negative contributors - beginning with the largest negative contributor - were commercial and industrial loans outstanding, average prime rate charged by banks, and change in labor cost per unit of output*. Based on revised data, the lagging index remained unchanged in April and increased 0.4 percent in March.
