The coincident index was unchanged for the third consecutive month in February. Index levels were revised slightly lower for months November 2007 through January 2008, due primarily to downward revisions to personal income less transfer payments. Employment has contributed negatively to the index for two consecutive months. The coincident index was unchanged between August 2007 and February 2008, and the strengths among its components have become less widespread in recent months. The lagging index increased again in February, and as a result, the coincident to lagging index has continued to decrease.
The leading index has been on a downtrend since the middle of 2007, and the weaknesses among its components have become very widespread in the last three months; the last time the leading index worsened for five consecutive months was in early 2001. Meanwhile, the growth in the coincident index has stalled in recent months, after gradually slowing throughout 2007. At the same time, real GDP growth fell to 0.6 percent in the fourth quarter of 2007, down from a 4.9 percent annual rate in the third quarter and an average of 2.2 percent annual rate in the first half of 2007. The current behavior of the composite indexes suggests that increasing risks for economic weakness are likely to continue in the near term.
LEADING INDICATORS. Four of the ten indicators that make up the leading index increased in February. The positive contributors — beginning with the largest positive contributor — were real money supply, interest rate spread, manufacturers' new orders for nondefense capital goods and manufacturers' new orders for consumer goods and materials. The negative contributors — beginning with the largest negative contributor — were average weekly initial claims for unemployment insurance (inverted), building permits, vendor performance, index of consumer expectations, and stock prices. Average weekly manufacturing hours held steady in February.
The leading index now stands at 135.0 (1996=100). Based on revised data, this index decreased 0.4 percent in January and decreased 0.1 percent in December. During the six-month span through February, the leading index decreased 1.5 percent, with two out of ten components advancing (diffusion index, six-month span equals 20 percent).
COINCIDENT INDICATORS. Two of the four indicators that make up the coincident index increased in February. 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 124.9 (1996=100). This index remained unchanged in January and remained unchanged in December. During the six-month period through February, the coincident index remained unchanged.
LAGGING INDICATORS. The lagging index stands at 131.2 (1996=100) in February, with five of the seven components advancing. The positive contributors to the index — beginning with the largest positive contributor — were average duration of unemployment (inverted), commercial and industrial loans outstanding, change in CPI for services, ratio of consumer installment credit to personal income, and change in labor cost per unit of output. The negative contributor was the average prime rate charged by banks. The ratio of manufacturing and trade inventories to sales held steady in February. Based on revised data, the lagging index increased 0.1 percent in January and increased 0.3 percent in December.
