Since March, the leading index has declined by 2.8 percent (about a -5.5 percent annual rate), below the negative 1.8 percent rate (-3.5 percent annualized) between September 2007 and March 2008. In addition, weaknesses among the leading indicators have remained very widespread in recent months.
The coincident index, a measure of current economic activity, remained unchanged in September. But, between March and September, the index declined by 0.2 percent (about a -0.5 percent annual rate), well below the 0.5 percent rate of growth (about a 1.0 percent annual rate) that prevailed during the previous six months. In addition, the strengths and weaknesses among the coincident indicators have been balanced in recent months. Meanwhile, real GDP declined at a 0.3 percent average annual rate during the second and third quarter of 2008 (including a 0.6 percent annual rate of growth during the third quarter), well below the 1.5 percent average annual rate of growth for the previous two quarters.
Since October 2007, the leading index has been falling with consistently widespread weaknesses among its components; the largest decline in the leading index since mid-2001 has also intensified in recent months. At the same time, the coincident index has decreased slightly this year, and its six-month growth rate has been negative since June. The recent behavior of the composite indexes suggests economic weakness is likely to continue into the first half of 2009 and that risks for further economic weakness remain elevated.
LEADING INDICATORS
Two of the seven components of the leading index increased in September. The positive contributors to the index - in order from the largest positive contributor to the smallest - are production expectations and the yield spread. The negative contributors to the index - beginning with the largest negative contributor - are building permits (residential), industrial new orders, the stock price index, the inverted new unemployment claims and the ratio of the deflator of manufacturing value added to unit labor cost for manufacturing.
With the decrease of 0.6 percent in September, the leading index now stands at 124.9 (1990=100). Based on revised data, this index declined 0.4 percent in August and declined 0.7 percent in July. During the six-month span through September, the leading index decreased 2.8 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 September. The positive contributors to the index were wage and salaries and personal consumption. Industrial production and employment declined in September.
Remaining unchanged in September, the coincident index now stands at 123.0 (1990=100). Based on revised data, this index remained unchanged in August and increased 0.1 percent in July. During the six-month period through September, the coincident index decreased -0.2 percent, with two of the four series making a positive contribution (diffusion index, six-month span equals 50.0 percent).
