The Big Picture

« Transparent Factory | Main | The Frankenstein Economy? »

U.S. Leading Economic Index Declines in September

Monday, October 20, 2003 | 10:42 AM

Talk about a mixed message: While earnings continue to come put in (mostly) positive, the index of Leading Economic Indicators declined more than expected in September.

"The Conference Board announced today that the U.S. leading index decreased 0.2 percent, the coincident index increased 0.1 percent and the lagging index decreased 0.5 percent in September.

The leading index declined by 0.2 percent in September, led by a large negative contribution from the money supply. The coincident index increased by 0.1 percent in September, resuming the gradual upward trend underway since April."

The upturn in the leading index since March has already been followed by a pickup in economic growth (both real GDP and the coincident index) and other signs are emerging that moderately strong growth is persisting for now. While it is not likely that September’s small decline indicates that the recent upward trend in the leading index has ended, a continuation of stronger economic growth would be called into doubt if the leading index does not turn up again.

Leading Indicators. Four of the ten indicators that make up the leading index increased in September. The positive contributors - beginning with the largest positive contributor – were average weekly manufacturing hours, stock prices, manufacturers’ new orders for consumer goods and materials*, and manufacturers’ new orders for nondefense capital goods*. The negative contributors - beginning with the largest negative contributor – were real money supply*, interest rate spread, vendor performance, index of consumer expectations, building permits, and average weekly initial claims for unemployment insurance (inverted).

Coincident Indicators. All 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 industrial production, personal income less transfer payments*, manufacturing and trade sales*, and employees on nonagricultural payrolls.

Lagging Indicators. The lagging index stands at 97.4 (1996=100) in September, with three of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were ratio of consumer installment credit to personal income*, ratio of manufacturing and trade inventories to sales*, and change in labor cost per unit of output*. The three negative contributors were commercial and industrial loans outstanding*, average duration of unemployment (inverted), and change in CPI for services. Average prime rate charged by banks held steady in September. The lagging index held steady in August and decreased 0.1 percent in July.