The coincident index, a measure of current economic activity, increased slightly in January. Employment and industrial production made positive contributions to the coincident index in January while personal consumption of manufactured goods contributed negatively. The six-month growth rate of the coincident index slowed to 0.4 percent (about a 0.8 percent annual rate) during the six-month span through January, slightly down from a six-month growth rate of 0.9 percent (about a 1.8 percent annual rate) from January 2007 to July 2007. In addition, the strengths among the coincident indicators have remained more widespread than the weaknesses in recent months.
After remaining essentially flat throughout most of 2006, the leading index has increased at a slow but steady pace since the first quarter of 2007; however, this growth has been interrupted by two consecutive monthly declines in the index (in December and January). Meanwhile, real GDP grew at about a 2.3 percent average annual rate in the second half of 2007 (including a 1.4 percent annual growth rate in the fourth quarter), a modest increase from an average annual growth rate of 1.9 percent in the first half of 2007. The current behavior of the leading and coincident indexes suggests that economic growth is likely to continue in the near term, albeit at a moderate rate.
LEADING INDICATORS. Three of the seven components of the leading index increased in January. The positive contributors to the index — in order from the largest positive contributor to the smallest — are production expectations, the yield spread, and the ratio of the deflator of manufacturing value added to unit labor cost for manufacturing. The negative contributors to the index — beginning with the largest negative contributor — are the inverted new unemployment claims, the stock price index, and building permits (residential). Industrial new orders remained unchanged in January.
With the decrease of 0.6 percent in January, the leading index now stands at 130.0 (1990=100). Based on revised data, this index declined 0.6 percent in December and remained unchanged in November. During the six-month span through January, the leading index decreased 0.4 percent, and two of the seven components increased (diffusion index, six-month span equals 28.6 percent).
COINCIDENT INDICATORS. Two of the four components of the coincident index increased in January. The positive contributors to the index — in order from the largest positive contributor to the smallest — were employment, and industrial production. Personal consumption declined in January. Wages and salaries remained unchanged in January.
With the increase of 0.1 percent in January, the coincident index now stands at 123.0 (1990=100). Based on revised data, this index increased 0.2 percent in December and decreased 0.2 percent in November. During the six-month period through January, the coincident index increased 0.4 percent, with three of the four series making a positive contribution (diffusion index, six-month span equals 75.0 percent).
