The coincident index rose slightly in July, following two consecutive declines. Industrial production was the strongest positive contributor in July. But, the coincident index was revised down slightly from March to June as actual data for employment became available for the second quarter. During the past six months, the coincident index declined by 0.2 percent (about a -0.3 percent annual rate), which is well below the 0.6 percent rate of growth (about a 1.1 percent annual rate) that prevailed between July 2007 and January 2008. In addition, the weaknesses among the coincident indicators have been more widespread than strengths in recent months.
The leading index has been declining since October 2007 and the weaknesses among its components have remained very widespread throughout this period. The decline in the leading index has been the largest since mid-2001. At the same time, the coincident index, a measure of current economic activity, has slowed down in recent months and its six month growth rate has turned negative in June and July. 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, its first decline in five years). The recent behavior of the composite indexes suggests that economic growth will remain sluggish in the near term and risks for further weakness are rising.
LEADING INDICATORS
Two of the seven components of the leading index increased in July. The positive contributors to the index - in order from the largest positive contributor to the smallest - are the inverted new unemployment claims, and the yield spread. The negative contributors to the index - beginning with the largest negative contributor - are industrial new orders, the stock price index, production expectations, building permits (residential), and the ratio of the deflator of manufacturing value added to unit labor cost for manufacturing.
With the decrease of 0.7 percent in July, the leading index now stands at 126.5 (1990=100). Based on revised data, this index declined 0.2 percent in June and declined 0.6 percent in May. During the six-month span through July, the leading index decreased 2.2 percent, and one of the seven components increased (diffusion index, six-month span equals 14.3 percent).
COINCIDENT INDICATORS
Three of the four components of the coincident index increased in July. The positive contributors to the index - in order from the largest positive contributor to the smallest - were industrial production, personal consumption, and wage and salaries. Employment* declined in July.
With the increase of 0.1 percent in July, the coincident index now stands at 123.0 (1990=100). Based on revised data, this index decreased 0.1 percent in June and decreased 0.2 percent in May. During the six-month period through July, the coincident index decreased -0.2 percent, with one of the four series making a positive contribution (diffusion index, six-month span equals 25.0 percent).
