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The Leading Index for Germany Declined 2.6 Percent in October 2008
added: 2008-12-29

The Conference Board announced that the leading index for Germany declined 2.6 percent and the coincident index decreased 0.4 percent in October.

The leading index fell sharply in October, the largest monthly decline since January 1987, as stock prices and new orders in investment goods industries made very large negative contributions, while the consumer confidence index and the yield spread made smaller negative contributions. Since April 2008, the leading index has fallen by 6.8 percent (about a -13.1 percent annual rate), well below the 3.6 percent decline (about a -7.1 percent annual rate) between October 2007 and April 2008. Additionally, the weaknesses among the leading indicators have remained more widespread than the strengths in recent months.

The coincident index, a measure of current economic activity, declined for the fourth time in the past six months as a result of large decreases by industrial production and retail trade in October. During the past six months, the coincident index has declined at a 0.9 percent annual rate, down sharply from the 2.1 percent annual rate of increase which prevailed during the previous six months. The weaknesses among the coincident indicators have become more widespread than the strengths during this period. At the same time, real GDP has declined at a 1.9 percent average annual rate during the second and third quarters of 2008, falling sharply from the 3.5 percent average annual rate of growth for the fourth quarter of 2007 and first quarter of 2008.

The leading index has been trending downwards since July 2007, declining by more than 10 percent during this period. After growing steadily through 2006 and 2007, the coincident index has been fluctuating around a slight downward trend in 2008. The accelerating and widespread decline in the leading index suggests that the economy will remain weak going into 2009, and that the contraction in economic activity may deepen in the near term.

LEADING INDICATORS

Three of the seven components in the leading index increased in October. The positive contributors to the leading index - in order from the largest positive contributor to the smallest - are new residential construction orders, inventory change series, and gross enterprises and properties income. Negative contributors - in order from largest to smallest - are stock prices, new orders in investment goods industries, consumer confidence and yield spread.

With the 2.6 percent decrease in October, the leading index now stands at 89.3 (1990=100). Based on revised data, this index declined 0.9 percent in September and declined 0.5 percent in August. During the six-month span through October, the leading index decreased 6.8 percent, with three of the seven components increasing (diffusion index, six-month span equals 42.9 percent).

COINCIDENT INDICATORS

Three of the four components that make up the coincident index decreased in October. The positive contributor to the coincident index was employed persons. Industrial production, retail trade and manufacturing sales declined in October.

With the 0.4 percent decrease in October, the coincident index now stands at 110.6 (1990=100). Based on revised data, this index decreased 0.3 percent in September and increased 0.5 percent in August. During the six-month period through October, the coincident index decreased -0.5 percent, with one of the four components increasing (diffusion index, six-month span equals 25.0 percent).


Source: The Conference Board

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