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

Indicators Point to Recovery

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Apr 19, 2010, 10:00 ET

NEW YORK, April 19 /PRNewswire/ -- The Conference Board Leading Economic Index® (LEI) for the U.S. increased 1.4 percent in March, following a 0.4 percent gain in February, and a 0.6 percent rise in January. The U.S. LEI is now at its highest level.

Says Ataman Ozyildirim, economist at The Conference Board: "The U.S. LEI has risen steadily for a year, and its six-month growth rate has remained fairly stable in recent months – led by improvements in financial and labor market indicators. Payroll employment made its first substantial contribution to the coincident economic index, suggesting a recovery that is beginning to gain traction."

Adds Ken Goldstein, economist at The Conference Board: "The indicators point to a slow recovery that should continue over the next few months. The leading, coincident and lagging series are rising. Strength of demand remains the big question going forward. Improvement in employment and income will be the key factors in whether consumers push the recovery on a stronger path."

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

The Conference Board LEI for the U.S. increased again in March, and it has risen for a year now. The index was revised upwards in January and February as a result of data revisions in the underlying components. The interest rate spread, the average workweek, supplier deliveries and the stock market made the largest positive contributions to the index this month. The leading economic index rose 5.2 percent (a 10.6 percent annual rate) between September 2009 and March 2010, slightly slower than the increase of 6.2 percent (12.8 percent annual rate) for the previous six months. However, the strengths among the leading indicators have remained widespread in recent months.

The Conference Board CEI for the U.S. also increased in March, with all components contributing positively to the index. The coincident economic index increased 0.7 percent (a 1.4 percent annual rate) between September 2009 and March 2010, a reversal from the decline of 0.9 percent (a -1.8 percent annual rate) during the previous six months. In March, the lagging economic index increased marginally more than the CEI, and the coincident-to-lagging ratio remained unchanged. Meanwhile, real GDP expanded at a 5.6 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 a year now, and its six-month growth rate has been fairly stable in recent months. Meanwhile, The Conference Board CEI for the U.S. has risen modestly since mid-2009, after declining sharply the previous year and a half. Taken together, the current behavior of the composite indexes suggests that improving economic conditions should continue in the near term.

LEADING INDICATORS

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

The Conference Board LEI for the U.S. now stands at 109.6 (2004=100). Based on revised data, this index increased 0.4 percent in February and increased 0.6 percent in January. During the six-month span through March, the leading economic index increased 5.2 percent, with eight out of ten components advancing (diffusion index, six-month span equals 80 percent).

COINCIDENT INDICATORS

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

The Conference Board CEI for the U.S. now stands at 100.2 (2004=100). This index increased 0.1 percent in February and remained unchanged in January. During the six-month period through March, the coincident economic index increased 0.7 percent, with three 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 107.9 (2004=100) in March, with three of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were commercial and industrial loans outstanding*, change in labor cost per unit of output*, and change in CPI for services. The negative contributors – beginning with the largest negative contributor – were average duration of unemployment (inverted), and the ratio of consumer installment credit to personal income*. The ratio of manufacturing and trade inventories to sales* and average prime rate charged by banks* held steady in March. Based on revised data, the lagging economic index increased 0.1 percent in February and decreased 0.3 percent in January.

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 this release are those available "as of" 12 Noon on April 16, 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.

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

SOURCE The Conference Board