The coincident index, a measure of current economic activity, declined slightly in March, primarily as a result of a large drop in that month's retail sales survey. Despite this decrease, the coincident index increased by 0.6 percent (about a 1.1 percent annual rate) between September 2007 and March 2008, but this is a significant slowdown from the 3.1 percent annual rate of growth which prevailed during the first half of 2007. However, the strengths among the coincident indicators have remained more widespread than the weaknesses.
The growth rate of the leading index has fallen off dramatically over the past year, after maintaining a high level for most of the period between the third quarter of 2005 and the first quarter of 2007. Likewise, the growth rate of the coincident index has slowed dramatically since its March 2007 peak. At the same time, real GDP growth has declined somewhat from an average annual rate of 3.9 percent during the first two quarters of 2007 to 3.1 percent during the last two quarters. The behavior of the leading and coincident indexes suggests that economic growth is likely to continue slowing in the near term.
LEADING INDICATORS. Three of the six components that make up the leading index increased in September. The positive contributors-in order from the largest positive contributor to the smallest-are the Spanish contribution to Euro M2, the Spanish equity price index, and the inverted long-term government bond yield. The negative contributors -in order from the largest negative contributor to the smallest-are the capital equipment component of industrial production, job placings and order books survey.
With the decrease of 0.9 percent in March, the leading index now stands at 157.3 (1990=100). Based on revised data, this index increased 0.2 percent in February and declined 0.1 percent in January. During the six-month span through March, the index remained unchanged, and two of the six components advanced (diffusion index, six-month span equals 33.3 percent).
COINCIDENT INDICATORS. Three of the five components that make up the coincident index increased in March. The positive contributors — in order from the largest positive contributor to the smallest — are final household consumption, employment, and real imports. The retail sales survey declined in March, while industrial production remained unchanged.
With the decrease of 0.1 percent in March, the coincident index now stands at 159.0 (1990=100). Based on revised data, this index increased 0.3 percent in February and increased 0.2 percent in January. During the six-month span through March, the index increased 0.6 percent, and three of the five components advanced (diffusion index, six-month span equals 60.0 percent).
