The coincident index increased slightly again in January, and the strengths among the coincident indicators continue to be widespread. This index of current economic activity has been on a slightly rising trend since mid-2003, but its growth — which was about a 2.0 percent annual growth rate at the beginning of 2006 — has slowed down gradually to about a 1.0 percent annual rate, largely due to weakening industrial production in the second half of 2006.
The leading index was growing rapidly through September 2006, but its growth has slowed sharply in the last quarter of 2006, and it is now only slightly above its September 2006 level. At the same time, real GDP grew at a 2.6 percent annual rate in the fourth quarter of 2006, following 3.2 percent growth (average annual rate) in the first half of 2006. The recent behavior of the leading and coincident indexes so far still suggests that slow to moderate economic growth is likely to continue in the near term.
LEADING INDICATORS. Five 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 industrial new orders, the stock price index, the yield spread, the inverted new unemployment claims, and production expectations. The negative contributors to the index — beginning with the largest negative contributor — are the ratio of the deflator of manufacturing value added to unit labor cost for manufacturing* and building permits (residential).
With the increase of 0.2 percent in January, the leading index now stands at 129.3 (1990=100). Based on revised data, this index declined 0.1 percent in December and increased 0.4 percent in November. During the six-month span through January, the leading index increased 0.2 percent, and two of the seven components increased (diffusion index, six-month span equals 28.6 percent).
COINCIDENT INDICATORS. Three of the four components of the coincident index increased in January. The positive contributors to the index were personal consumption, wage and salaries*, and employment*. Industrial production declined in January.
With the increase of 0.1 percent in January, the coincident index now stands at 120.4 (1990=100). Based on revised data, this index increased 0.2 percent in December and increased 0.1 percent in November. During the six-month period through January, the coincident index increased 0.5 percent, with all of the four series making a positive contribution (diffusion index, six-month span equals 100.0 percent).
