The coincident index increased in February, as it has in four of the last six months. From August to February, the coincident index grew almost 1.0 percent (about a 2.0 percent annual rate). In February, industrial production made the largest contribution to the coincident index, and the strengths among the coincident indicators continue to be more widespread than weaknesses in recent months.
Following the recent declines, the leading index is now 0.9 percent below its most recent high in January 2006, but its six-month growth rate has picked up to about a 0.4 to 0.9 percent annual rate, up from about a -1.3 percent annual rate in mid-2006. At the same time, real GDP growth was at a 2.2 percent annual rate (preliminary estimates) in the fourth quarter of 2006, following a 2.0 percent rate in the third quarter. The recent behavior of the leading and coincident indexes still suggests that slow to moderate economic growth may 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 manufacturers' new orders for nondefense capital goods, stock prices, real money supply, 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), index of consumer expectations, vendor performance, building permits and interest rate spread. The average weekly manufacturing hours held steady in February.
The leading index now stands at 137.3 (1996=100). Based on revised data, this index decreased 0.3 percent in January and increased 0.7 percent in December. During the six-month span through February, the leading index increased 0.2 percent, with four out of ten components advancing (diffusion index, six-month span equals forty percent).
COINCIDENT INDICATORS. All four of the indicators that make up the coincident index increased in February. The positive contributors to the index — beginning with the largest positive contributor — were industrial production, personal income less transfer payments, employees on nonagricultural payrolls, and manufacturing and trade sales.
The coincident index now stands at 123.7 (1996=100). This index decreased 0.1 percent in January and increased 0.3 percent in December. During the six-month period through February, the coincident index increased 1.0 percent.
LAGGING INDICATORS. The lagging index stands at 127.9 (1996=100) in February, with four of the seven components advancing. The positive contributors to the index — beginning with the largest positive contributor — were 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 average duration of unemployment (inverted). The ratio of manufacturing and trade inventories to sales and average prime rate charged by banks held steady in February. Based on revised data, the lagging index remained unchanged in January and increased 0.7 percent in December.
