The coincident index increased again in January, although its growth rate has slowed in recent months. The strengths among the coincident indicators have remained fairly widespread. For this month, positive contributions from personal income less transfer payments, real manufacturing and trade sales, and industrial production more than offset the small decline in nonagricultural payroll employment. Despite the gain in January, the six-month growth rate in the coincident index has slowed to 0.4 percent (a 0.8 percent annual rate) from July 2007 to January 2008, down from a 1.1 percent rate from January to July 2007 (a 2.3 percent annual rate). The lagging index remained unchanged in January, and as a result, the ratio of the coincident to lagging index increased slightly this month.
The leading index has continued to decline since its most recent highest value reached in July 2007, and the weakness among the leading indicators has become more widespread. However, the coincident index has mostly increased during this period, although its growth rate has slowed considerably in recent months. At the same time, real GDP growth decreased to 0.6 percent in the fourth quarter of 2007, down from an average of about a 2.2 percent annual rate in the first half of 2007 and a 4.9 percent annual rate in the third quarter. Taken together, the current behavior of the composite indexes suggests increasing risks for further economic weakness, and that sluggish economic growth will likely continue in the near term.
LEADING INDICATORS. Four of the ten indicators that make up the leading index increased in January. The positive contributors — beginning with the largest positive contributor — were real money supply, average weekly initial claims for unemployment insurance (inverted), index of consumer expectations and vendor performance. The negative contributors — beginning with the largest negative contributor — were stock prices, building permits, manufacturers' new orders for nondefense capital goods, and interest rate spread. Average weekly manufacturing hours, and manufacturers' new orders for consumer goods and materials held steady in January.
The leading index now stands at 135.8 (1996=100). Based on revised data, this index decreased 0.1 percent in December and decreased 0.4 percent in November. During the six-month span through January, the leading index decreased 2.0 percent, with two out of ten components advancing (diffusion index, six-month span equals 20 percent).
COINCIDENT INDICATORS. Three of the four indicators that make up the coincident index increased in January. The positive contributors to the index — beginning with the largest positive contributor — were personal income less transfer payments, manufacturing and trade sales, and industrial production. The negative contributor was employees on nonagricultural payrolls.
The coincident index now stands at 125.2 (1996=100). This index increased 0.1 percent in December and remained unchanged in November. During the six-month period through January, the coincident index increased 0.4 percent.
