The Conference Board Leading Economic Index(R) (LEI) for the U.S. Increases

Indicators Point to a Strengthening Recovery

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Feb 18, 2010, 10:00 ET

NEW YORK, Feb. 18 /PRNewswire/ -- The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.3 percent in January, following a 1.2 percent gain in December, and a 1.1 percent rise in November.

Says Ataman Ozyildirim, Economist at The Conference Board: "The U.S. LEI has risen steadily for nearly a year, led by an improvement in financial markets and a manufacturing upturn. Consumer expectations and housing permits have also contributed to these gains over this period, but to a lesser extent – especially in recent months. Current economic conditions, as measured by The Conference Board Coincident Economic Index® (CEI), have also improved modestly since July 2009, helped by strengthening industrial production, despite continued weakness in employment."

Adds Ken Goldstein, Economist at The Conference Board: "The cumulative change in the U.S. LEI over the past six months has been a strong 9.8 percent, annualized. This signals continued economic recovery at least through the spring."

The Conference Board Coincident Economic Index® (CEI) for the U.S. rose 0.2 percent in January, following no change in December, and a 0.3 percent increase in November. The Conference Board Lagging Economic Index™ (LAG) declined 0.1 percent in January, following a 0.3 percent decline in December, and a 0.7 percent decline in November.

The Conference Board LEI for the U.S. continued to increase in January. The interest rate spread, supplier deliveries, and the manufacturing workweek made the largest positive contributions to the index this month, more than offsetting the negative contributions from real money supply, unemployment claims, and building permits. The six-month change in the index has continued to moderate -- to 4.8 percent (a 9.8 percent annual rate), down from 6.2 percent (about a 12.8 percent annual rate) in the six-month period through September 2009. However, the strengths among the leading indicators have remained widespread in recent months.

The Conference Board CEI for the U.S. also continued to increase in January, and it has advanced in four of the last seven months. Industrial production continued to gain, more than offsetting the small decrease in employment. Between July 2009 and January 2010, the CEI rose 0.6 percent (a 1.2 percent annual rate), a reversal from the decline of 2.4 percent (a -4.7 percent annual rate) during the previous six months. In January, the lagging economic index continued to decrease, and with the coincident economic index rising slightly, the coincident-to-lagging ratio increased further. Meanwhile, real GDP expanded at a 5.7 percent annual rate in the fourth quarter of 2009, following an increase of 2.2 percent annual rate in the third quarter.

The Conference Board LEI for the U.S. has risen steadily for the past ten months, and it has reached its highest level. However, its six-month growth rate has moderated somewhat in recent months. Meanwhile, The Conference Board CEI for the U.S. has risen slightly since July 2009, after a steep decline from December 2007 to June 2009. Taken together, the current behavior of the composite indexes suggests that economic conditions should continue to improve in the near term.

LEADING INDICATORS. Five of the ten indicators that make up The Conference Board LEI for the U.S. increased in January. The positive contributors – beginning with the largest positive contributor – were the interest rate spread, the index of supplier deliveries (vendor performance), average weekly manufacturing hours, stock prices and the index of consumer expectations. The negative contributors – beginning with the largest negative contributor – were real money supply*, average weekly initial claims for unemployment insurance (inverted), building permits, and manufacturers' new orders for nondefense capital goods*. Manufacturers' new orders for consumer goods and materials* held steady in January.

The Conference Board LEI for the U.S. now stands at 107.4 (2004=100). Based on revised data, this index increased 1.2 percent in December and increased 1.1 percent in November. During the six-month span through January, the leading economic index increased 4.8 percent, with eight out of ten components advancing (diffusion index, six-month span equals 80 percent).

COINCIDENT INDICATORS. Three of the four indicators that make up The Conference Board CEI for the U.S. increased in January. The positive contributors to the index – beginning with the largest positive contributor – were industrial production, personal income less transfer payments* and manufacturing and trade sales*. The negative contributor was employees on nonagricultural payrolls.

The Conference Board CEI for the U.S. now stands at 100.1 (2004=100). This index remained unchanged in December and increased 0.3 percent in November. During the six-month period through January, the coincident economic index increased 0.6 percent, with three out of four components advancing (diffusion index, six-month span equals 75.0 percent).

LAGGING INDICATORS. The Conference Board LAG for the U.S. stands at 108.0 (2004=100) in January, with two of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were change in labor cost per unit of output* and change in CPI for services*. The negative contributors – beginning with the largest negative contributor – were commercial and industrial loans outstanding*, average duration of unemployment (inverted), ratio of consumer installment credit to personal income*, and ratio of manufacturing and trade inventories to sales*. The average prime rate charged by banks held steady in January. Based on revised data, the lagging economic index decreased 0.3 percent in December and decreased 0.7 percent in November.

DATA AVAILABILITY AND NOTES.

The data series used to compute The Conference Board Leading Economic Index^® (LEI) for the U.S., The Conference Board Coincident Economic Index^® (CEI) for the U.S. and The Conference Board Lagging Economic Index^® (LAG) for the U.S. are those available "as of" 12 Noon on February 17, 2010. Some series are estimated as noted below.

* Series in The Conference Board LEI for the U.S. based on our estimates are manufacturers' new orders for consumer goods and materials, manufacturers' new orders for nondefense capital goods, and the personal consumption expenditure used to deflate the money supply. Series in The Conference Board CEI for the U.S. that are based on our estimates are personal income less transfer payments and manufacturing and trade sales. Series in The Conference Board LAG for the U.S. that are based on our estimates are inventories to sales ratio, consumer installment credit to income ratio, change in labor cost per unit of output, the personal consumption expenditure used to deflate commercial and industrial loans outstanding and change in CPI for services.

The procedure used to estimate the current month's personal consumption expenditure deflator (used in the calculation of real money supply and commercial and industrial loans outstanding) now incorporates the current month's consumer price index when it is available before the release of The Conference Board LEI for the U.S.

NOTE:

This month's release incorporates benchmark revisions that resulted from revisions in the underlying data for manufacturers' new orders for consumer goods and materials and manufacturers' new orders for non-defense capital goods. As a result, the standardization factors of these two components and the history of the leading economic index were recomputed. The impact of these revisions on the leading economic index is minimal, but the revised index will no longer be directly comparable to those issued prior to the benchmark revision. For further information please contact [email protected]

Website: www.conference-board.org/economics/bci

SOURCE The Conference Board