The coincident index increased again in March. From September to March, the coincident index increased by 0.9 percent (a 1.8 percent annual rate). In March, the largest contribution came from nonagricultural employment, and the strengths of the coincident index have been more widespread than the weaknesses in recent months.
The leading index is still about 0.9 percent below its most recent high in January 2006 and it is 0.8 percent below its March 2006 level. Despite a small pick up in December, the leading index has been essentially flat since mid-2006. At the same time, real GDP growth was at a 2.5 percent annual rate 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 suggests that slow economic growth is likely to continue in the near term.
LEADING INDICATORS. Six of the ten indicators that make up the leading index increased in March. The positive contributors — beginning with the largest positive contributor — were average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, real money supply, vendor performance, building permits, and manufacturers' new orders for consumer goods and materials. The negative contributors — beginning with the largest negative contributor — were stock prices, index of consumer expectations, interest rate spread and manufacturers' new orders for nondefense capital goods.
The leading index now stands at 137.4 (1996=100). Based on revised data, this index decreased 0.6 percent in February and decreased 0.3 percent in January. During the six-month span through March, the leading index decreased 0.1 percent, with three out of ten components advancing (diffusion index, six-month span equals thirty five percent).
COINCIDENT INDICATORS. Three of the four indicators that make up the coincident index increased in March. The positive contributors to the index — beginning with the largest positive contributor — were employees on nonagricultural payrolls, personal income less transfer payments, and manufacturing and trade sales. The negative contributor was industrial production.The coincident index now stands at 123.7 (1996=100). This index increased 0.2 percent in February and decreased 0.1 percent in January. During the six-month period through March, the coincident index increased 0.9 percent.
LAGGING INDICATORS. The lagging index stands at 127.9 (1996=100) in March, 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 labor cost per unit of output, ratio of manufacturing and trade inventories to sales, and the ratio of consumer installment credit to personal income. The negative contributors — beginning with the largest negative contributor — were average duration of unemployment (inverted), and the change in CPI for services. The average prime rate charged by banks held steady in March. Based on revised data, the lagging index increased 0.2 percent in February and remained unchanged in January.
