The coincident index remained unchanged in June, and index levels were revised slightly downwards between February and May as new quarterly data became available for the wages and salaries component. During the last six months, the coincident index increased by 0.2 percent (about a 0.5 percent annual rate of growth), which is well below the 1.5 percent annual rate of growth that prevailed during the last half of 2007. In addition, the weaknesses and strengths among the coincident indicators have been balanced in recent months.
The leading index has been declining since October 2007, and the weaknesses among its components have become very widespread throughout this period. The decline in the leading index has been the largest since mid-2001. The growth of the coincident index, a measure of current economic activity, has slowed down in recent months compared to the rapid growth of the first half of 2007. Meanwhile, real GDP growth slowed to a 0.2 percent average annual rate in the first half of 2008 (including a 1.2 percent annual rate of decline in the second quarter), well below the 2.1 percent average annual rate of growth in the second half of 2007. The recent behavior of the composite indexes suggests that economic growth will remain weak in the near term.
LEADING INDICATORS
Two of the seven components of the leading index increased in June. The positive contributors to the index - in order from the largest positive contributor to the smallest - are the inverted new unemployment claims (inverted), and the yield spread. The negative contributors to the index - beginning with the largest negative contributor - are the stock price index, industrial new orders, building permits (residential), production expectations, and the ratio of the deflator of manufacturing value added to unit labor cost for manufacturing.
With the decrease of 0.2 percent in June, the leading index now stands at 127.4 (1990=100). Based on revised data, this index declined 0.5 percent in May and declined 0.2 percent in April. During the six-month span through June, the leading index decreased 1.8 percent, and one of the seven components increased (diffusion index, six-month span equals 14.3 percent).
COINCIDENT INDICATORS
One of the four components of the coincident index increased in June. The only positive contributor to the index was employment. Industrial production, personal consumption, and wage and salaries all declined in June.
With the coincident index remaining unchanged in June, the index now stands at 123.4 (1990=100). Based on revised data, this index decreased 0.1 percent in May and increased 0.1 percent in April. During the six-month period through June, the coincident index increased 0.2 percent, with two of the four series making a positive contribution (diffusion index, six-month span equals 50.0 percent).
