The coincident index increased again in July and it is 1.1 percent above its January level (a 2.1 percent annual rate). The largest positive contributions to the gain in the coincident index have come from industrial production and employment in recent months. The strengths among the coincident indicators have been very widespread in recent months despite the slower growth in this index of current economic activity in 2007, down from its growth rate of about a 2.5 percent average annual rate in 2006.
Following a brief pick up at the end of 2006, the leading index has been essentially flat in the first half of 2007 and the strengths and weaknesses among the leading indicators have been balanced over this period. At the same time, in the first half of the year real GDP growth slowed down to about a 2.0 percent average annual rate (including a 0.6 percent rate in the first quarter and a 3.4 percent rate in the second quarter), following a 2.6 percent average rate in the second half of 2006. The performance of the leading index so far in the first half of 2007 continues to suggest that the economy is likely to grow in the near term, albeit at a slow pace.
LEADING INDICATORS.
Six of the ten indicators that make up the leading index increased in July. The positive contributors — beginning with the largest positive contributor — were index of consumer expectations, vendor performance, average weekly initial claims for unemployment insurance (inverted), real money supply, stock prices, and manufacturers' new orders for consumer goods and materials. The negative contributors — beginning with the largest negative contributor — were building permits, manufacturers' new orders for nondefense capital goods, and interest rate spread. The average weekly manufacturing hours held steady in July.
The leading index now stands at 138.1 (1996=100). Based on revised data, this index decreased 0.3 percent in June and increased 0.2 percent in May. During the six-month span through July, the leading index increased 0.1 percent, with five out of ten components advancing (diffusion index, six-month span equals 50 percent).
COINCIDENT INDICATORS.
All four indicators that make up the coincident index increased in July. The positive contributors to the index — beginning with the largest positive contributor — were industrial production, employees on nonagricultural payrolls, personal income less transfer payments, and manufacturing and trade sales.
The coincident index now stands at 124.6 (1996=100). This index increased 0.2 percent in June and increased 0.1 percent in May. During the six-month period through July, the coincident index increased 1.1 percent.
LAGGING INDICATORS.
The lagging index stands at 128.9 (1996=100) in July, with three of the seven components advancing. The positive contributors to the index — beginning with the largest positive contributor — were commercial and industrial loans outstanding, ratio of manufacturing and trade inventories to sales, and ratio of consumer installment credit to personal income. The negative contributors were average duration of unemployment (inverted) and change in CPI for services. The change in labor cost per unit of output* and average prime rate charged by banks held steady in July. Based on revised data, the lagging index increased 0.5 percent in June and increased 0.3 percent in May.
