The Conference Board Leading Economic Index(R) (LEI) for the U.S. Increases Indicators Point to Slow Recovery

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Mar 18, 2010, 10:00 ET

NEW YORK, March 18 /PRNewswire/ -- The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.1 percent in February, following a 0.3 percent gain in January, and a 1.2 percent rise in December.

Says Ataman Ozyildirim, Economist at The Conference Board: "The LEI for the U.S. has risen rapidly for almost a year now and it has reached its highest level. But, the sharp pick up in the LEI appears to be stabilizing. As the economy moves from recovery into early phases of an expansion, the leading economic index points to moderately improving economic conditions in the near term. Correspondingly, the coincident economic index has been rising since July 2009, albeit slightly because of continued weakness in employment."

Adds Ken Goldstein, Economist at The Conference Board: "The indicators point to a slow recovery this summer. Going forward, the big question remains the strength of demand. Without increased consumer demand, job growth will likely be minimal over the next few months. "

The Conference Board Coincident Economic Index® (CEI) for the U.S. rose 0.1 percent in February, following no change in January, and a 0.1 percent increase in December. The Conference Board Lagging Economic Index® (LAG) increased 0.3 percent in February, following a 0.2 percent decline in January, and a 0.4 percent decline in December.

The Conference Board LEI for the U.S. increased slightly in February, and it has risen for the past eleven months. The interest rate spread and real money supply made the largest positive contributions to the index this month, more than offsetting the large negative contributions from average weekly hours in manufacturing and stock prices. The six-month change in the index continued to moderate in February, to 4.4 percent (an 8.9 percent annual rate), down from 6.2 percent (a 12.8 percent annual rate) in the six-month period through September 2009. However, the strengths among the leading indicators have remained very widespread in recent months, with all ten components increasing over the past six months.

The Conference Board CEI for the U.S. also increased in February, after remaining unchanged in January. Apart from employment, which continued to fall, all the other coincident indicators made small positive contributions to the index this month. Between August 2009 and February 2010, the CEI increased 0.6 percent (a 1.2 percent annual rate), a reversal from the decline of 1.7 percent (a -3.3 percent annual rate) during the previous six months. In February, the lagging economic index increased more than the CEI, and the coincident-to-lagging ratio decreased as a result. Meanwhile, real GDP expanded at a 5.9 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 rapidly for almost a year now, but its six-month growth rate has continued to moderate. Meanwhile, The Conference Board CEI for the U.S. has risen slightly since July 2009, after declining sharply the previous year and a half. Taken together, the current behavior of the composite indexes suggests that the improving economic conditions should continue in the near term.

LEADING INDICATORS

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

The Conference Board LEI for the U.S. now stands at 107.6 (2004=100). Based on revised data, this index increased 0.3 percent in January and increased 1.2 percent in December. During the six-month span through February, the leading economic index increased 4.4 percent, with all components advancing (diffusion index, six-month span equals 100.0 percent).

COINCIDENT INDICATORS

Three of the four indicators that make up The Conference Board CEI for the U.S. increased in February. The positive contributors to the index -- beginning with the largest positive contributor -- were personal income less transfer payments*, industrial production, and manufacturing and trade sales. Employees on nonagricultural payrolls declined in February.

The Conference Board CEI for the U.S. now stands at 100.1 (2004=100). This index remained unchanged in January and increased 0.1 percent in December. During the six-month period through February, 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 February, with three 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*, average duration of unemployment (inverted), and ratio of consumer installment credit to personal income*. Commercial and industrial loans outstanding* declined in February. The ratio of manufacturing and trade inventories to sales*, average prime rate charged by banks, and change in CPI for services* held steady in February. Based on revised data, the lagging economic index decreased 0.2 percent in January and decreased 0.4 percent in December.

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. and reported in the tables in this release are those available "as of" 12 Noon on March 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, and the personal consumption expenditure used to deflate commercial and industrial loans outstanding.

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

SOURCE The Conference Board