The coincident economic index also fell sharply in November, due to large declines in industrial production and the wholesale and retail sales components. With November's decline, this index of current economic activity has fallen by 3.0 percent (a -5.9 percent annual rate) from May to November, a sharp reversal from the 1.1 percent increase (annual rate) from November 2007 to May 2008. Moreover, the weaknesses among the CEI components continued to be very widespread during the last six months. At the same time, real GDP growth has slowed to a 2.1 percent annual rate in the third quarter of 2008, down from the 3.3 percent average annual rate during the first half of 2008.
The rate of deterioration in the leading index has accelerated in recent months, after a brief rebound in July. The monthly declines in the last two months were the largest since the 1997-98 Asian financial crises. The coincident index has also weakened substantially this year, with its rate of decrease having picked up in recent months. Taken together, the persistent and widespread weaknesses in both the LEI and CEI suggest that economic activity is likely to remain very sluggish in the near term, and the risk for further economic weakness remains elevated.
LEADING INDICATORS
All seven components that make up the leading economic index decreased in November. The negative contributors - from the largest negative contributor to the smallest - were real exports FOB, the (inverted) index of inventories to shipments, value of machinery orders, letter of credit arrivals, private construction orders, stock prices, and the (inverted) yield of government public bonds.
With the 3.5 percent decrease in November, the leading index now stands at 103.7 (2004=100). Based on revised data, this index declined 3.0 percent in October and declined 0.7 percent in September. During the six-month span through November, the leading index decreased 10.0 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 economic index increased in November. The positive contributor was monthly cash earnings. Industrial production, the wholesale and retail sales component, and total employment declined in November.
With the 1.7 percent decrease in November, the coincident index now stands at 106.3 (2004=100). Based on revised data, this index decreased 0.6 percent in October and decreased 0.4 percent in September. During the six-month span through November, the coincident index decreased 3.0 percent, with one of the four components advancing (diffusion index, six-month span equals 25.0 percent).
