Despite declines in November and December, the leading index has increased by 2.5 percent (a 5.1 percent annual rate of growth) between June and December, a small increase over the 3.4 percent average annual rate of growth which prevailed during the first half of 2007. The strengths among the leading indicators have been more widespread than the weaknesses in recent months.
The coincident index increased slightly in December after declining for the first time in eight months in November. Between June and December, the six-month growth rate for the coincident index declined to 1.2 percent (a 2.5 percent annual rate), down from 2.6 percent (about a 5.3 percent annual rate) from January 2007 to July 2007. The strengths among the coincident indicators have remained widespread in recent months.
The leading index fell in November and December after growing at a robust pace between April and October, and the growth of the coincident index also moderated somewhat in recent months. In addition, real GDP grew at about a 5.8 percent average annual rate during the third and fourth quarters of 2007, (including a 6.3 percent annual rate during the fourth quarter) slightly above the 5.5 percent average annual rate during the first half of 2007. The recent behavior of both the leading and coincident indexes suggests that moderate economic growth should continue in the near term.
LEADING INDICATORS. Three of the seven components that make up the leading index increased in December. The positive contributors — from the largest positive contributor to the smallest — were real exports FOB, letter of credit arrivals and the (inverted) index of inventories to shipments. Negative contributors — from the largest negative contributor to the smallest — were value of machinery orders, the (inverted) yield of government public bonds, private construction orders, and stock prices.
With the 0.9 percent decrease in December, the leading index now stands at 178.5 (1990=100). Based on revised data, this index declined 0.2 percent in November and increased 2.2 percent in October. During the six-month span through December, the leading index increased 2.5 percent, with five of the seven components advancing (diffusion index, six-month span equals 71.4 percent).
COINCIDENT INDICATORS. Three of the four components that make up the coincident index increased in December. The positive contributors to the leading index — in order from the largest positive contributor to the smallest — were industrial production, total employment and monthly cash earnings. The wholesale and retail sales component was the only negative contributor.
With the 0.1 percent increase in December, the coincident index now stands at 170.4 (1990=100). Based on revised data, this index decreased 0.4 percent in November and increased 0.6 percent in October. During the six-month span through December, the coincident index increased 1.2 percent, with all of the four components advancing (diffusion index, six-month span equals 100.0 percent).
