Since February, the leading index has fallen by 4.0 percent (about a -7.8 percent annual rate), well below the 10.5 percent annual rate reached between April and October 2007. In addition, the weaknesses among the leading indicators have been very widespread in recent months.
The coincident index, a measure of current economic activity, declined slightly in August. Industrial production and wholesale and retail sales both made negative contributions to the index this month, more than offsetting an increase in total employment. During the last six months, the coincident index increased by 1.1 percent (about a 2.1 percent annual rate), which is well above the -0.2 percent annual rate that prevailed between August 2007 and February 2008. In addition, the strengths among the coincident indicators have remained more widespread than the weaknesses in recent months.
Though it rose in July, the leading index continued its downward trend which started in the fourth quarter of 2007. Meanwhile, the coincident index has been fluctuating around a relatively flat trend since the start of the year. At the same time, real GDP grew at a 3.3 percent average annual rate during the first half of 2008 (including a 3.4 percent annual rate in the second quarter), down from the 6.2 percent average rate of growth in the second half of last year. Taken together, the decline and widespread weakness in the leading index over the past six months suggest that economic growth is likely to remain slow in the near term.
LEADING INDICATORS
Only one of the seven components that make up the leading index increased in August. The positive contributor was the (inverted) yield of government public bonds. Negative contributors - from the largest negative contributor to the smallest - were value of machinery orders, the (inverted) index of inventories to shipments, stock prices, letter of credit arrivals, private construction orders, and real exports FOB.
With the 2.3 percent decrease in August, the leading index now stands at 169.9 (1990=100). Based on revised data, this index increased 1.2 percent in July and declined 1.7 percent in June. During the six-month span through August, the leading index decreased 4.0 percent, with none of the seven components advancing (diffusion index, six-month span equals 0.0 percent).
COINCIDENT INDICATORS
Only one of the four components that make up the coincident index increased in August. The positive contributor was total employment. Industrial production, the wholesale and retail sales component, and monthly cash earnings declined in August.
With the 0.2 percent decrease in August, the coincident index now stands at 171.5 (1990=100). Based on revised data, this index increased 0.9 percent in July and decreased 0.9 percent in June. During the six-month span through August, the coincident index increased 1.1 percent, with three of the four components advancing (diffusion index, six-month span equals 75.0 percent).
