The CEI also declined sharply in December. Industrial production registered a record drop this month. The number of employed persons and the real retail, wholesale, and manufacturing sales component also made negative contributions to the index. The six-month growth rate of the CEI fell to -3.9 percent (a -7.6 percent annual rate), also its lowest level since 1974. Moreover, the weaknesses among the coincident indicators continued to be very widespread. At the same time, real GDP continued its downtrend through the third quarter of 2008 - it declined at a 1.8 percent annual rate. This is the first time since 2001 that real GDP has declined in two consecutive quarters.
The LEI and the CEI have been falling for more than a year now, and their rate of decline continued to accelerate in the second half of 2008. In addition, the weaknesses in both composite indexes have been very widespread. Taken together, the accelerating and widespread deterioration in the composite economic indexes suggests that the current contraction in economic activity will continue through the first half of 2009.
LEADING INDICATORS
Four of the ten components that make up the leading economic index increased in December. The positive contributors to the index - in order from the largest positive contributor to the smallest - include real money supply, stock prices, interest rate spread, and the (inverted) business failures. The negative contributors - in order from the largest negative contributor to the smallest - include the index of overtime worked, the six month growth rate of labor productivity, the new orders for machinery and construction component, the Tankan business conditions survey, dwelling units started, and real operating profits.
With the decrease of 4.3 percent in December, the leading economic index now stands at 85.4 (2004=100). Based on revised data, this index decreased 2.9 percent in November and decreased 2.5 percent in October. During the six-month span through December, the index decreased 12.7 percent, and one of the ten components advanced (diffusion index, six-month span equals 10.0 percent).
COINCIDENT INDICATORS
Only one of the four components that make up the coincident economic index increased in December. The positive contributor to the index was wage and salary income. Industrial production, the retail, wholesale, and manufacturing sales* component, and number of employed persons declined in December.
With the decrease of 1.4 percent in December, the coincident index now stands at 99.0 (2004=100). Based on revised data, this index decreased 1.0 percent in November and decreased 0.4 percent in October. During the six-month span through December, the index decreased 3.9 percent, and one of the four components advanced (diffusion index, six-month span equals 25.0 percent).
