The coincident index increased modestly in November, and all the component indicators made positive contributions to the index for this month. The index was revised slightly lower in September and October, as a result of downward data revisions to the components. The coincident index increased 0.8 percent (a 1.6 percent annual rate) from May to November and the strengths among the coincident indicators remained very widespread. The lagging index increased again in November, matching the increase in the coincident index for the month, and as a result, the coincident to lagging ratio was unchanged for November.
After having been essentially flat since early 2006, the leading index has weakened sharply in recent months, and it has declined to its lowest level since the middle of 2005. Meanwhile, the coincident index has continued to increase throughout most of this period, but its growth has moderated recently. In addition, real GDP has continued to expand, growing at an average annual rate of 3.1 percent through the third quarter of the year (including a 4.9 percent annual rate growth in the third quarter). The recent behavior of the composite indexes suggest that while slow economic growth is likely in the near term, risks for further economic weakness have increased.
LEADING INDICATORS
Three of the ten indicators that make up the leading index increased in November. The positive contributors - beginning with the largest positive contributor - were vendor performance, average weekly manufacturing hours, and manufacturers' new orders for nondefense capital goods. The negative contributors - beginning with the largest negative contributor - were stock prices, average weekly initial claims for unemployment insurance (inverted), index of consumer expectations, real money supply, building permits, interest rate spread, and manufacturers' new orders for consumer goods and materials.
The leading index now stands at 136.3 (1996=100). Based on revised data, this index decreased 0.5 percent in October and increased 0.1 percent in September. During the six-month span through November, the leading index decreased 1.2 percent, with five out of ten components advancing (diffusion index, six-month span equals 50 percent).
COINCIDENT INDICATORS
All four of the indicators that make up the coincident index increased in November. The positive contributors to the index - beginning with the largest positive contributor - were personal income less transfer payments, industrial production, employees on nonagricultural payrolls and manufacturing and trade sales.
The coincident index now stands at 125.1 (1996=100). This index decreased 0.1 percent in October and increased 0.1 percent in September. During the six-month period through November, the coincident index increased 0.8 percent.
LAGGING INDICATORS
The lagging index stands at 130.2 (1996=100) in November, with four of the seven components advancing. The positive contributors to the index - beginning with the largest positive contributor - were change in CPI for services, commercial and industrial loans outstanding, change in labor cost per unit of output, and ratio of consumer installment credit to personal income. The negative contributors - beginning with the largest negative contributor - were the average prime rate charged by banks and average duration of unemployment (inverted). The ratio of manufacturing and trade inventories to sales held steady in November. Based on revised data, the lagging index increased 0.3 percent in October and increased 0.5 percent in September.
