The coincident index, a measure of current economic activity, increased slightly in June after declining in May. Manufacturing sales made the largest positive contribution to the index, more than offsetting a decline in retail sales. Over the past six months, the coincident index increased by 0.6 percent (about a 1.3 percent annual rate), well below the 1.8 percent annual rate of growth which prevailed during the previous six months. In addition, the strengths and weaknesses among the coincident indicators have been roughly balanced in recent months.
The leading index has been declining since July 2007 and the coincident index has remained essentially flat since January 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. The recent behavior of the composite indexes suggests that economic growth will be sluggish in the near term, and that risks for further weakness going forward remain elevated.
LEADING INDICATORS
Two of the seven components in the leading index increased in June. The positive contributors to the leading index - in order from the largest positive contributor to the smallest - are inventory change series and gross enterprises and properties income. Negative contributors - in order from largest to smallest - are new orders in investment goods industries, stock prices, new residential construction orders and yield spread. Consumer confidence remained unchanged in June.
With the 1.1 percent decrease in June, the leading index now stands at 93.7 (1990=100). Based on revised data, this index declined 1.0 percent in May and declined 0.5 percent in April. During the six-month span through June, the leading index decreased 5.2 percent, with two of the seven 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 June. The positive contributors to the coincident index were manufacturing sales, employed persons, and industrial production. Retail trade declined in June.
With the 0.1 percent increase in June, the coincident index now stands at 110.9 (1990=100). Based on revised data, this index decreased 0.2 percent in May and increased 0.2 percent in April. During the six-month period through June, the coincident index increased 0.6 percent, with two of the four components increasing (diffusion index, six-month span equals 50.0 percent).
