* The leading index fell in August for the second consecutive month, but there were upward revisions to the leading index in the previous several months as actual data for real operating profits for the second quarter of 2006 became available. With this month's decline, the level of the leading index is now -0.9 percent below its most recent peak in April, and the strengths among the leading indicators have become less
widespread in recent months.
* The coincident index increased in August after being essentially flat
since the beginning of 2006. At the same time, real GDP growth slowed
to a 2.1 percent annual rate in the first half of 2006, slightly down
from the 2.6 percent rate in the second half of 2005. The behavior of
the leading index in recent months suggests that the economy is likely
to grow more slowly in the near term.
LEADING INDICATORS. Three of the ten components that make up the leading index increased in August. The positive contributors to the index - in order from the largest positive contributor to the smallest -- include stock prices, real operating profits*, and the six month growth rate of labor productivity. The negative contributors -- in order from the largest negative contributor to the smallest - include the index of overtime worked, the (inverted) business failures*, interest rate spread, real money supply, and the new orders for machinery and construction component*. Dwelling units started and the Tankan business conditions survey remained unchanged in August.
With the decrease of 0.4 percent in August, the leading index now stands at 101.4 (1990=100). Based on revised data, this index decreased 0.5 percent in July and increased 0.2 percent in June. During the six-month span through August, the index decreased 0.2 percent, and three of the ten components advanced (diffusion index, six-month span equals 35.0 percent).
COINCIDENT INDICATORS. All four components that make up the coincident index increased in August. The positive contributors to the index -- in order from the largest positive contributor to the smallest -- include industrial production, number of employed persons, the retail, wholesale, and manufacturing sales* component, and number of employed persons.
With the increase of 0.3 percent in August, the coincident index now stands at 106.3 (1990=100). Based on revised data, this index remained unchanged in July and decreased 0.1 percent in June. During the six-month span through August, the index increased 0.4 percent, and two of the four components advanced (diffusion index, six-month span equals 50.0 percent).
