The coincident index also decreased in August, and July's small increase was revised down to no change. Industrial production dropped sharply this month, while employment has continued to fall. The six-month decline in the coincident index picked up to 0.4 percent (a -0.7 percent annual rate), from 0.2 percent (a -0.4 percent annual rate) for the previous six months, and the weaknesses among the coincident indicators remained widespread. In August, the lagging index continued to rise, and the coincident-to-lagging ratio continued to decline as a result.
The leading index has been generally falling for a year now, and the coincident index has been mildly declining since late 2007. Meanwhile, real GDP growth slowed to a 2.1 percent average annual rate for the first half of the year (including a 3.3 percent annual rate in the second quarter), from an average annual rate of 2.3 percent in the second half of 2007. All in all, the prolonged and widespread deterioration in the composite indexes suggests further weakening in economic conditions going forward.
LEADING INDICATORS
Four of the ten indicators that make up the leading index increased in August. The positive contributors - beginning with the largest positive contributor - were the interest rate spread, index of consumer expectations, stock prices, and manufacturers' new orders for consumer goods and materials. The negative contributors - beginning with the largest negative contributor - were index of supplier deliveries (vendor performance), building permits, average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, and manufacturers' new orders for nondefense capital goods and real money supply.
The leading index now stands at 100.8 (2004=100). Based on revised data, this index decreased 0.7 percent in July and increased 0.1 percent in June. During the six-month span through August, the leading index decreased 1.1 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 August. 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 106.5 (2004=100). This index remained unchanged in July and decreased 0.2 percent in June. During the six-month period through August, the coincident index decreased 0.4 percent, with one out of four components advancing (diffusion index, six-month span equals 25 percent).
LAGGING INDICATORS
The lagging index stands at 112.6 (2004=100) in August, with two of the seven components advancing. The positive contributors to the index - beginning with the larger positive contributor - were commercial and industrial loans outstanding and ratio of consumer installment credit to personal income. The negative contributors - beginning with the largest negative contributor - were average duration of unemployment (inverted), change in CPI for services, and change in labor cost per unit of output. The ratio of manufacturing and trade inventories to sales, and average prime rate charged by banks held steady in August. Based on revised data, the lagging index increased 0.4 percent in July and remained unchanged in June.
