The coincident index decreased sharply in September and it has declined or held steady since October 2007. Industrial production fell steeply this month, while employment continued to decline. The six-month decline in the coincident index has picked up to 0.8 percent (a -1.7 percent annual rate), from a decrease of 0.3 percent (a -0.6 percent annual rate) in the previous six months, while the weaknesses among the coincident indicators remained very widespread. In September, the coincident index decreased more than the lagging index, and the coincident-to-lagging ratio continued to decline as a result.
With consistently widespread weakness among its components, the leading index has been falling since July 2007. Following the leading index, the coincident index, a monthly measure of current economic conditions, has also been decreasing, and its rate of decline has accelerated in recent months. Meanwhile, real GDP growth slowed to a 1.8 percent average annual rate in the first half of the year, down from an average annual rate of 2.3 percent in the second half of 2007. Taken together, the behavior of the composite indexes suggests that the economy is unlikely to improve in the near term.
LEADING INDICATORS
Six of the ten indicators that make up the leading index increased in September. The positive contributors - beginning with the largest positive contributor - were real money supply*, index of consumer expectations, interest rate spread, index of supplier deliveries (vendor performance), manufacturers' new orders for nondefense capital goods*, and manufacturers' new orders for consumer goods and materials*. The negative contributors - beginning with the largest negative contributor - were building permits, average weekly initial claims for unemployment insurance (inverted), stock prices, and average weekly manufacturing hours.
The leading index now stands at 100.6 (2004=100). Based on revised data, this index decreased 0.9 percent in August and decreased 0.7 percent in July. During the six-month span through September, the leading index decreased 1.3 percent, with two out of ten components advancing (diffusion index, six-month span equals 20 percent).
COINCIDENT INDICATORS
Two of the four indicators that make up the coincident index increased in September. The positive contributors to the index - beginning with the larger positive contributor - were personal income less transfer payments and manufacturing and trade sales. The negative contributors were industrial production and employees on nonagricultural payrolls.
The coincident index now stands at 106 (2004=100). This index remained unchanged in August and decreased 0.2 percent in July. During the six-month period through September, the coincident index decreased 0.8 percent, with one out of four components advancing (diffusion index, six-month span equals 25 percent).
LAGGING INDICATORS
The lagging index stands at 112.2 (2004=100) in September, with two of the seven components advancing. The positive contributors to the index - beginning with the larger positive contributor - were commercial and industrial loans outstanding and the ratio of manufacturing and trade inventories to sales. The negative contributors - beginning with the largest negative contributor - were average duration of unemployment (inverted), change in CPI for services, and change in labor cost per unit of output. The average prime rate charged by banks, and ratio of consumer installment credit to personal income* held steady in September. Based on revised data, the lagging index increased 0.2 percent in August and increased 0.5 percent in July.
