The coincident index also declined slightly in February, following a small decline in January. Industrial production and employment continued to contribute negatively to the index. With this month's decrease, the growth rate of this index of current economic conditions has slowed to a 0.3 percent rate from August 2007 to February 2008 (a 0.6 percent annual rate), but the strengths and weaknesses among the coincident components remained fairly balanced over the past six months.
The leading index has now declined 5.2 percent below its most recent high level of December 2006 and the weakness has also become gradually more widespread among its components. At the same time, real GDP grew at an average rate of 2.3 percent (annualized) over the last two quarters of 2008 (including a 3.5 percent rate in the fourth quarter), up from the 1.1 percent average annual rate in the first half of the year. The current behavior of both leading and coincident indexes suggests that the strong economic activity in the fourth quarter is unlikely to persist and risks for further economic weakness are increasing in the near term.
LEADING INDICATORS
Four of the ten components that make up the leading index increased in February. The positive contributors to the index - in order from the largest positive contributor to the smallest - include the new orders for machinery and construction component, the index of overtime worked, interest rate spread and real money supply. The negative contributors - in order from the largest negative contributor to the smallest - include stock prices, the six-month growth rate of labor productivity, the Tankan business conditions survey, real operating profits, dwelling units started, and the (inverted) business failures.
With the decrease of 0.2 percent in February, the leading index now stands at 84.0 (1990=100). Based on revised data, this index decreased 0.4 percent in January and decreased 0.5 percent in December. During the six-month span through February, the index decreased 2.9 percent, and four of the ten components advanced (diffusion index, six-month span equals 40.0 percent).
COINCIDENT INDICATORS
Two of the four components that make up the coincident index decreased in February. The positive contributors to the index - in order from the larger positive contributor to the smaller - include wage and salary income and the real retail, wholesale, and manufacturing sales component. Number of employed persons and industrial production declined in February.
With the decrease of 0.1 percent in February, the coincident index now stands at 109.1 (1990=100). Based on revised data, this index decreased 0.2 percent in January and increased 0.1 percent in December. During the six-month span through February, the index increased 0.3 percent, and three of the four components advanced (diffusion index, six-month span equals 62.5 percent).
