20 February 2003
U.S. leading economic index declines
New York - The Conference Board announced today that the U.S. leading index decreased 0.1 percent, the coincident index increased by 0.2 percent, and the lagging index decreased 0.1 percent in January.
- A sharp drop in claims for unemployment insurance offset the weak expectations of consumers in January. The leading index remains well above its peak prior to the 2001 recession and just below the previous high achieved in May 2002.
- The coincident index turned up again in January after pausing in the last quarter of 2002. This month’s increase in the coincident index, the largest in six months, is consistent with the gains in the leading index late last year and reflects better current conditions in the beginning of this year.
- Barring any shock or prolonged uncertainty in the Middle East, the leading and coincident indexes point to a more robust pace of economic activity in the coming months.
Leading Indicators. Four of the ten indicators that make up the leading index increased in January. The positive contributors to the index—beginning with the largest positive contributor—were average weekly initial claims for unemployment insurance (inverted), real money supply*, manufacturers’ new orders for consumer goods and materials*, and interest rate spread. The negative contributors—from the largest negative contributor—were index of consumer expectations, building permits, average weekly manufacturing hours, manufacturers’ new orders for nondefense capital goods*, and stock prices. Vendor performance holds steady in January.
The leading index now stands at 111.2 (1996=100). Based on revised data, this index increased 0.2 percent in December and increased 0.5 percent in November. During the six-month span through January, the leading index increased 0.2 percent, with four of the ten components advancing (diffusion index, six-month span equals 40 percent).
Coincident Indicators. All four indicators that make up the coincident index increased in January. 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 115.5 (1996=100). Based on revised data, this index held steady in December and increased 0.1 percent in November. During the six-month period through January, the coincident index increased 0.2 percent.
Lagging Indicators. The lagging index decreased 0.1 percent to 99.2 (1996=100) in January, with two of the seven components declining. The negative contributors to the index—beginning with the larger negative contributor—were commercial and industrial loans outstanding* and ratio of consumer installment credit to personal income*. Change in CPI for services* is the only component that increased this month. Average duration of unemployment, average prime rate charged by banks, change in labor cost per unit of output*, and ratio of manufacturing and trade inventories to sales* held steady in January. Based on revised data, the lagging index decreased 0.3 percent in December and decreased 0.4 percent in November.
Data Availability. The data series used by The Conference Board to compute the three composite indexes and reported in the tables in this release are those available “as of” 12 Noon on February 19, 2003. Some series are estimated as noted below.
*Notes: Series in the leading index that are based on The Conference Board estimates are manufacturers’ new orders for consumer goods and materials, manufacturers’ new orders for nondefense capital goods, and the personal consumption expenditure deflator for money supply. Series in the coincident index that are based on The Conference Board estimates are personal income less transfer payments and manufacturing and trade sales. Series in the lagging index that are based on The Conference Board estimates are inventories to sales ratio, change in CPI for services, consumer installment credit to income ratio, change in labor cost per unit of output, and the personal consumption expenditure deflator for commercial and industrial loans outstanding.
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