The coincident index, a measure of current economic activity, increased in August as both industrial production and retail trade rose substantially. Over the past six months, the coincident index increased by 0.2 percent (about a 0.4 percent annual rate), well below the 1.3 percent rate (about a 2.6 percent annual rate) which prevailed during the previous six months. In addition, the weaknesses among the coincident indicators have been more widespread than the strengths in recent months.
The leading index has been falling since July 2007 and its decline has become steeper so far in 2008. After growing steadily throughout 2006 and 2007, the coincident index has been fluctuating around an essentially flat trend since the beginning of 2008. At the same time, real GDP grew at a 1.5 percent average annual rate for the first two quarters of 2008 (including a -2.0 percent annual rate during the second quarter), slightly below the 1.9 percent average annual rate for the last two quarters of 2007. Taken together, the recent behavior of the composite indexes suggests that risks for further economic weakness remain elevated.
LEADING INDICATORS
Five of the seven components in the leading index increased in August. The positive contributors to the leading index - in order from the largest positive contributor to the smallest - are new residential construction orders, stock prices, inventory change series, gross enterprises and properties income, and new orders in investment goods industries. Negative contributors - in order from largest to smallest - are consumer confidence, and yield spread.
With the 0.2 percent decrease in August, the leading index now stands at 92.6 (1990=100). Based on revised data, this index declined 1.1 percent in July and declined 1.0 percent in June. During the six-month span through August, the leading index decreased 4.3 percent, with two of the eight components increasing (diffusion index, six-month span equals 28.6 percent).
COINCIDENT INDICATORS
Three of the four components that make up the coincident index increased in August. The positive contributors to the coincident index were industrial production, retail trade, and employed persons. Manufacturing sales declined in August.
With the 0.5 percent increase in August, the coincident index now stands at 111.3 (1990=100). Based on revised data, this index decreased 0.2 percent in July and increased 0.1 percent in June. During the six-month period through August, the coincident index increased 0.2 percent, with one of the four components increasing (diffusion index, six-month span equals 25.0 percent).
