The leading index increased in September, following two consecutive declines. From March to September, the leading index fell by 0.9 percent (a -1.7 percent annual rate). The leading index has declined in 5 of the last 8 months. Weaknesses offset strengths among the leading indicators in recent months. Weakening manufacturers' new orders of nondefense goods and housing permits made the largest negative contributions to the leading index from March to September, offsetting positive contributions from M2 money supply and consumer expectations.
The coincident index remained unchanged in September. This measure of current economic activity has been increasing consistently since September 2005, although the pace moderated in recent months. From March to September, the coincident index grew 0.8 percent (a 1.6 percent annual rate), and the strengths continued to be more widespread than weaknesses in recent months.
The leading index has fallen 1.0 percent below its most recent high reached in January. At the same time, real GDP growth slowed to a 2.6 percent (annual) rate in the second quarter, following a 5.6 percent gain in the first quarter. The behavior of the leading index so far suggests that economic growth should continue at the slow rate in the near term.
LEADING INDICATORS.Five of the ten indicators that make up the leading index increased in September. The positive contributors - beginning with the largest positive contributor - were index of consumer expectations, real money supply*, stock prices, average weekly initial claims for unemployment insurance (inverted), and manufacturers' new orders for nondefense capital goods*. The negative contributors - beginning with the largest negative contributor - were building permits, average weekly manufacturing hours, vendor performance, interest rate spread, and manufacturers' new orders for consumer goods and materials*.
The leading index now stands at 137.7 (1996=100). Based on revised data, this index decreased 0.2 percent in August and decreased 0.3 percent in July. During the six-month span through September, the leading index decreased 0.9 percent, with five out of ten components advancing (diffusion index, six-month span equals 45 percent).
COINCIDENT INDICATORS.Three of the four indicators that make up the coincident index increased in September. The positive contributors to the index - beginning with the largest positive contributor - were personal income less transfer payments*, manufacturing and trade sales*, and employees on nonagricultural payrolls. The negative contributor was industrial production.
The coincident index now stands at 123.3 (1996=100). This index increased 0.2 percent in August and increased 0.1 percent in July. During the six-month period through September, the coincident index increased 0.8 percent.
LAGGING INDICATORS.The lagging index stands at 124.3 (1996=100) in September, with two of the seven components advancing. The positive contributors to the index - beginning with the largest positive contributor - were change in CPI for services and ratio of consumer installment credit outstanding to personal income. The negative contributors - beginning with the largest negative contributor - were commercial and industrial loans outstanding* and change in labor cost per unit of output*. The average duration of unemployment (inverted), ratio of manufacturing and trade inventories to sales* and average prime rate charged by banks* held steady in September. Based on revised data, the lagging index increased 0.2 percent in August and decreased 0.2 percent in July.
