The coincident index, a measure of current economic activity, declined for the fourth time in the past six months. Industrial production excluding construction and the retail sales survey both made substantial negative contributions. During the last six months, the coincident index declined by 0.8 percent (about a -1.6 percent annual rate), down from a 0.9 percent annual rate of increase for the previous six months. Additionally, the weaknesses among the coincident indicators have been slightly more widespread than the strengths in recent months.
Though the leading index increased this month, its overall trend remains sharply downward and the gains this month were almost entirely the result of an increase in the Spanish contribution to Euro M2. The recent deterioration of the leading index is the largest since its 1992-93 decline. Meanwhile, the coincident index, after slowing during the second half of 2007, has been in decline since February 2008. At the same time, real GDP growth fell from a 2.5 percent average annual rate for the second half of 2007, to a 1.0 percent average annual rate for 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
Two of the six components that make up the leading index increased in August. The positive contributors - in order from the largest positive contributor to the smallest - are the Spanish contribution to Euro M2, and the inverted long-term government bond yield. The negative contributors - in order from the largest negative contributor to the smallest - are job placings, order books survey, the Spanish equity price index, and the capital equipment component of industrial production.
With the increase of 0.6 percent in August, the leading index now stands at 156.0 (1990=100). Based on revised data, this index declined 0.3 percent in July and declined 0.4 percent in June. During the six-month span through August, the index decreased 1.6 percent, and one of the six components advanced (diffusion index, six-month span equals 16.7 percent).
COINCIDENT INDICATORS
Three of the five components that make up the coincident index increased in August. The positive contributors - in order from the largest positive contributor to the smallest - are final household consumption, real imports, and employment. Industrial production excluding construction and the retail sales survey declined in August.
With the decrease of 0.1 percent in August, the coincident index now stands at 157.6 (1990=100). Based on revised data, this index increased 0.1 percent in July and decreased 0.3 percent in June. During the six-month span through August, the index decreased -0.8 percent, and two of the five components advanced (diffusion index, six-month span equals 40.0 percent).
