The coincident index increased again in September, and it grew 1.0 percent from March to September (a 1.9 percent annual rate), below its long-term average growth rate (about a 2.6 percent annual rate measured over 1959-2007), and down from the 2.5 percent average annual rate in 2006. Despite slower growth, the strengths among the coincident indicators continued to be very widespread in recent months. At the same time, the lagging index continued to increase. The gains in the lagging index have been larger than those in the coincident index recently, and as a result, the ratio of the coincident to lagging indexes decreased in four of the last six months. (This ratio tends to have long leads in the business cycle).
The leading index has been essentially flat throughout 2007, and the six-month diffusion index suggests that the strengths among the leading indicators continue to be only slightly more widespread than weaknesses in recent months. At the same time, real GDP grew at a 2.2 percent average annual rate in the first half of the year, only slightly up from the 1.6 percent average rate in the second half of 2006. The current behavior of the composite indexes suggests that slow economic growth is likely to continue in the near term.
LEADING INDICATORS
Seven of the ten indicators that make up the leading index increased in September. The positive contributors - beginning with the largest positive contributor - were vendor performance, average weekly initial claims for unemployment insurance (inverted), stock prices, manufacturers' new orders for nondefense capital goods, real money supply, manufacturers' new orders for consumer goods and materials and index of consumer expectations. The negative contributors - beginning with the larger negative contributor - were building permits and interest rate spread. Average weekly manufacturing hours held steady in September.
The leading index now stands at 137.9 (1996=100). Based on revised data, this index decreased 0.8 percent in August and increased 0.7 percent in July. During the six-month span through September, the leading index was unchanged, with six out of ten components advancing (diffusion index, six-month span equals 60 percent).
COINCIDENT INDICATORS
All four indicators that make up the coincident index increased in September. The positive contributors to the index - beginning with the largest positive contributor - were employees on nonagricultural payrolls, personal income less transfer payments, manufacturing and trade sales, and industrial production. The coincident index now stands at 125 (1996=100). This index increased 0.1 percent in August and increased 0.3 percent in July. During the six-month period through September, the coincident index increased 1.0 percent.
LAGGING INDICATORS
The lagging index stands at 129.9 (1996=100) in September, 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, average duration of unemployment (inverted), change in CPI for services, and ratio of consumer installment credit to personal income. The negative contributors - beginning with the larger negative contributor - were average prime rate charged by banks and change in labor cost per unit of output. The ratio of manufacturing and trade inventories to sales held steady in September. Based on revised data, the lagging index increased 0.3 percent in August and increased 0.1 percent in July.
