Since January, the leading index has declined by 2.3 percent (about a -4.5 percent annual rate), well below the 2.2 percent annual rate of increase which prevailed between July 2007 and January 2008. In addition, the weaknesses among the leading indicators have remained consistently widespread in recent months.
The coincident index, a measure of current economic activity, increased in July following four consecutive declines. In July, a large increase in the retail sales survey more than offset a modest decline in industrial production excluding construction. Since January, the coincident index has declined by 0.4 percent (about a -0.8 percent annual rate), significantly below the 0.9 percent annual rate of increase for the previous six months. Additionally, the strengths among the coincident indicators ha ve been slightly more widespread than the weaknesses in recent months.
Since February, the leading index has begun to fall after slowing in the second half of 2007, following three years of steady growth. The deterioration in the index over the past six months is the sharpest since its 1992-93 decline. Meanwhile, the coincident index has remained essentially flat during the past year. At the same time, real GDP growth declined sharply - from a 2.5 percent average annual rate during the second half of 2007 to a 1.0 percent average annual rate during the first half of 2008 (including a 0.6 percent annual rate for the second quarter). Taken together, the recent behavior of the composite indexes suggests that the risks for economic weakness in the near-term remain elevated.
LEADING INDICATORS
One of the six components that make up the leading index increased in September. The only positive contributor was the Spanish contribution to Euro M2. The negative contributors - in order from the largest negative contributor to the smallest - are the capital equipment component of industrial production, job placings, order books survey, the Spanish equity price index and the inverted long-term government bond yield.
With the decrease of 0.4 percent in July, the leading index now stands at 154.8 (1990=100). Based on revised data, this index declined 0.4 percent in June and declined 0.7 percent in May. During the six-month span through July, the index decreased 2.3 percent, and one of the six components advanced (diffusion index, six- month span equals 16.7 percent).
COINCIDENT INDICATORS
Four of the five components that make up the coincident index increased in July. The positive contributors - in order from the largest positive contributor to the smallest - are retail sales survey, final household consumption, real imports and employment. Industrial production excluding construction declined in July.
With the increase of 0.3 percent in July, the coincident index now stands at 158.1 (1990=100). Based on revised data, this index decreased 0.3 percent in June and decreased 0.2 percent in May. During the six-month span through July, the index decreased -0.4 percent, and three of the five components advanced (diffusion index, six-month span equals 60.0 percent).
