The coincident index remained unchanged in May after a slight increase in April. A large negative contribution from industrial production offset positive contributions from personal consumption of manufactured goods, employment, and wages and salaries. During the last six months, the coincident index increased by 0.9 percent (about a 1.8 percent annual rate), slightly above the growth that prevailed during the second half of 2007, but well below the 2.5 to 3.5 percent annual rate at the beginning of 2007. In addition, the strengths among the coincident indicators have remained more widespread than weaknesses in recent months.
The leading index has been declining since October 2007, and the weaknesses among its components have become very widespread. The decline in the leading index has been the largest since mid-2001. The coincident index, a measure of current economic activity, has been growing more slowly in recent months compared to growth rates reached in the first half of 2007. Meanwhile, real GDP grew at a 1.8 percent annual rate in the first quarter of 2008 (according to revised figures), below the 2.1 percent average annual rate in the second half of 2007. The recent behavior of the composite indexes suggests weakening economic growth going forward in the near term.
LEADING INDICATORS. Three of the seven components of the leading index increased in May. The positive contributors to the index — in order from the largest positive contributor to the smallest — are the inverted new unemployment claims, the stock price index, and the yield spread. The negative contributors to the index — beginning with the largest negative contributor — are production expectations, industrial new orders, building permits (residential), and the ratio of the deflator of manufacturing value added to unit labor cost for manufacturing.
With the decrease of 0.5 percent in May, the leading index now stands at 127.8 (1990=100). Based on revised data, this index declined 0.1 percent in April and declined 0.2 percent in March. During the six-month span through May, the leading index decreased 2.1 percent, and one of the seven components increased (diffusion index, six-month span equals 14.3 percent).
COINCIDENT INDICATORS. Three of the four components of the coincident index increased in May. The positive contributors to the index — in order from the largest positive contributor to the smallest — were personal consumption, wage and salaries*, and employment. Industrial production declined in May.
Remaining unchanged in May, the coincident index stands at 123.9 (1990=100). Based on revised data, this index increased 0.2 percent in April and remained unchanged in March. During the six-month period through May, the coincident index increased 0.9 percent, with three of the four series making a positive contribution (diffusion index, six-month span equals 75.0 percent).
