In addition, the weaknesses among the leading indicators have remained very widespread in recent months.
The coincident index, a measure of current economic activity, increased for a second consecutive month in August. Gains in retail sales outweighed a small decline in industrial production. The coincident index has increased by 0.4 percent during the past six months (about a 0.8 percent annual rate), well below the 1.9 percent annual rate for the previous six months. Additionally, the strengths among the coincident indicators have remained widespread in recent months.
The leading index has been trending downward since the middle of 2007, and the rate of this decline has increased substantially since March of this year. Following the decline in the leading index, the coincident index has grown at a sluggish pace in 2008 after maintaining a robust pace of growth throughout 2007. Meanwhile, real GDP growth has slowed sharply, down to a 0.5 percent average annual rate for the first half of the year (including a 0.0 percent annual rate for the second quarter), well below the 2.5 percent average annual rate for the second half of 2007. Taken together, the recent behavior of the composite indexes suggests that the economy will remain weak in the near term.
LEADING INDICATORS
Three of the seven components that make up the leading index increased in August. The positive contributors - from the largest positive contributor to the smallest - were stock prices, productivity for the whole economy, and operating surplus of corporations. The negative contributors - from the largest negative contributor to the smallest - were consumer confidence, volume of expected output, order book volume and yield spread.
With the 0.6 percent decrease in August, the leading index now stands at 122.2 (1990=100). Based on revised data, this index declined 0.7 percent in July and declined 1.0 percent in June. During the six-month span through August, the leading index decreased 3.8 percent, with one of the seven components advancing (diffusion index, six-month span equals 14.3 percent).
COINCIDENT INDICATORS
Three of the four components that make up the coincident index increased in August. The positive contributors - from the largest positive contributor to the smallest - were retail sales, employment, and real household disposable income. Industrial production declined.
With the increase of 0.2 percent in August, the coincident index now stands at 120.4 (1990=100). Based on revised data, this index increased 0.1 percent in July and decreased 0.2 percent in June. During the six-month period through August, the coincident index increased 0.4 percent, with three of the four components advancing (diffusion index, six-month span equals 75.0 percent).
