The coincident index decreased slightly in September, driven by large negative contributions from personal consumption of manufactured goods and industrial production. Despite some short-term volatility, this index of current economic activity has been on a slightly rising trend since mid-2003, but its growth has moderated slightly (down to about a 1.0 percent annual rate) in recent months. The strengths and weaknesses among the coincident indicators have also become balanced in recent months.
Following a sharp pick up through mid-2006, the growth rate of the leading index moderated slightly in recent months. At the same time, real GDP increased at a 4.9 percent annual rate in the second quarter of 2006, following a 1.8 percent annual rate in the first quarter. The recent behavior of the leading index suggests that economic growth is likely to continue at a moderate rate in the near term.
LEADING INDICATORS. Four of the seven components of the leading index increased in September. The positive contributors to the index — in order from the largest positive contributor to the smallest — are the inverted new unemployment claims, the yield spread, the stock price index, and the ratio of the deflator of manufacturing value added to unit labor cost for manufacturing*. The negative contributors to the index — beginning with the largest negative contributor — are building permits (residential) and production expectations. Industrial new orders remained unchanged in September.
With the increase of 0.2 percent in September, the leading index now stands at 129.7 (1990=100). Based on revised data, this index remained unchanged in August and increased 0.4 percent in July. During the six-month span through September, the leading index increased 2.4 percent, and four of the seven components increased (diffusion index, six-month span equals 57.1 percent).
COINCIDENT INDICATORS. Two of the four components of the coincident index increased in September. The positive contributors to the index — in order from the largest positive contributor to the smallest — are employment* and wage and salaries*. The negative contributors to the index — beginning with the largest negative contributor — are personal consumption and industrial production.
With the decrease of 0.1 percent in September, the coincident index now stands at 120.0 (1990=100). Based on revised data, this index increased 0.3 percent in August and remained unchanged in July. During the six-month period through September, the coincident index increased 0.3 percent, with two of the four series making a positive contribution (diffusion index, six-month span equals 50.0 percent).
