The coincident index also fell in October, due to large declines in industrial production and the wholesale and retail sales component. With this month's decline, the coincident index has fallen by 1.6 percent (a -3.1 percent annual rate), down from an increase of 0.6 percent (about a 1.3 percent annual rate) from October 2007 to April 2008. Moreover, the weaknesses among the coincident indicators have become more widespread than the strengths 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, and a 6.2 percent average annual rate in the second half of 2007.
The leading index has continued on a downward trend after a brief increase in July, and it has declined by almost 10 percent from its most recent high in October 2007, the largest decrease since the 1997-98 Asian financial crises. At the same time, the coincident index has also weakened this year, with its rate of decrease having picked up substantially in recent months. Taken together, the decline and widespread weakness in both the leading and coincident indexes suggest that economic activity is likely to remain sluggish in the near term, and the risk for further economic weakness remains elevated.
LEADING INDICATORS
Three of the seven components that make up the leading index increased in October. The positive contributors - from the largest positive contributor to the smallest - were value of machinery orders, the (inverted) yield of government public bonds, and private construction orders. Negative contributors - from the largest negative contributor to the smallest - were stock prices, letter of credit arrivals, real exports FOB, and the (inverted) index of inventories to shipments.
With the 2.9 percent decrease in October, the leading index now stands at 163.4 (1990=100). Based on revised data, this index declined 0.8 percent in September and declined 2.6 percent in August. During the six-month span through October, the leading index decreased 7.6 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 index increased in October. The positive contributor was monthly cash earnings. Industrial production and the wholesale and retail sales component declined, while total employment remained unchanged in October.
With the 0.7 percent decrease in October, the coincident index now stands at 168.7 (1990=100). Based on revised data, this index decreased 0.4 percent in September and decreased 0.3 percent in August. During the six-month span through October, the coincident index decreased 1.6 percent, with one of the four components advancing (diffusion index, six-month span equals 25.0 percent).
