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The Conference Board announced today that the leading index for Germany decreased 0.6 percent in July, and the coincident index held steady.

  • The leading index has been steadily declining since January of this year and has returned to its January 1998 level. This weakness has become more widespread among its components, as shown by the diffusion index falling below 40 percent.
  • A slowdown in industrial activity, as well as instability in the stock market and in consumer confidence, have brought the leading index down nearly three percent from its recent peak reached in February 2000.

LEADING INDICATORS. Three of the nine components of the leading index increased in July. The positive contributors to the leading index -in order from the largest positive contributor to the smallest- are inventory change*, new residential construction orders*, and inverted applications for unemployment compensation*. Five components decreased in July. The negative contributors to the leading index -in order from the largest to the smallest negative contributor- are growth rate of CPI Services, stock prices, gross enterprises and properties income*, consumer confidence index*, and new orders in investment goods industries*. Yield spread remained flat in July.

With the decrease of 0.6 percent in July, the leading index now stands at 103.1 (1990=100). Based on revised data, this index decreased 0.1 percent in June and decreased 0.5 percent in May. During the six-month span through July, the leading index decreased 2.4 percent, and only two of the nine components increased (diffusion index, six-month span equals 22.2 percent).

* See notes under data availability.

The next release is scheduled for September 27, 2001 at 9:30 A.M. ET

COINCIDENT INDICATORS. Two of the four components of the coincident index increased in July. The increases occurred in manufacturing sales* and retail trade*. The inverted unemployment rate remained steady, while industrial production* decreased in July. Holding steady in July, the coincident index now stands at 101.7 (1990=100). Based on revised data, this index decreased 0.1 percent in June and remained flat in May. During the six-month period through July, the coincident index remained flat, with only one of four series making positive contributions (diffusion index, six-month span equals 37.5 percent).


DATA AVAILABILITY. The data series used by The Conference Board to compute the two composite indexes reported in the tables in this release are those available "as of" 10 A.M. ET on August 28, 2001. Some series are estimated as noted below.

NOTES: Series in the leading index that are based on The Conference Board estimates are new orders for investment goods industries, applications for unemployment compensation, consumer confidence, inventory change, new residential construction orders, and gross enterprises and properties income. Series in the coincident index that are based on The Conference Board estimates are industrial production, manufacturing sales and retail trade.

# # #

Professional Contacts at The Conference Board:
Ataman Ozyildirim: 1-212-339-0399
Mike Fort: 1-212-339-0402
Bart Van Ark: 31-50-363-3674

Media Contacts:
Randy Poe: 1-212-339-0234
Frank Tortorici: 1-212-339-0231


THE CYCLICAL INDICATOR APPROACH. The composite indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading and coincident indexes are essentially composite averages of between four and nine individual leading or coincident indicators. (See page 3 for details.) They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component-primarily because they smooth out some of the volatility of individual components.

Historically, the cyclical turning points in the leading index have occurred before those in aggregate economic activity, while the cyclical turning points in the coincident index have occurred at about the same time as those in aggregate economic activity.

A change in direction in a composite index does not signal a cyclical turning point unless the movement is of significant size, duration, and scope. Historical analysis with U.S. data shows recession warnings are best determined by looking for negative growth of about 3.5 percent, coupled with declines in at least half of the components over a six-month span. Further explanations of the cyclical indicator approach and the composite index methodology appear in The Conference Board's Business Cycle Indicators report and Web

* See notes under data availability.

Germany Composite Indexes: Components and Standardization Factors
 Leading IndexFactor
1.New Orders, Investment Goods.0604
2.Applications for Unemployment Compensation.0283
3.Yield Spread, 10 year minus 3 month.3379
4.Change in Inventories.0993
5.Gross Enterprise and Property Income.0835
6.Stock Prices.0302
7.New Orders, Residential Construction.0415
8.Growth Rate for Consumer Price Index for Services.2067
9.Consumer Confidence Index.1122

Coincident Index
1.Manufacturing Sales.0591
2.Industrial Production.1018
3.Retail sales.0963
4.Unemployment Rate.7428

The component factors are inversely related to the standard deviation of the month-to-month changes in each component. They are used to equalize the volatility of the contribution from each component and are "normalized" to sum to 1. These factors were revised effective with January 30, 2001 release, and all historical values for the two composite indexes have been revised at the time to reflect the changes. (Under normal circumstances, updates to the leading and coincident indexes only incorporate revisions to data over the past six months.)

The factors above were calculated using 1973-1999 as the sample period for measuring volatility for the leading index, and 1960-1999 as the sample period for the coincident index. There are additional sample periods as the result of different starting dates for the component data. When one or more components is missing, the other factors are adjusted proportionately to ensure that the total continues to sum to 1. For additional information on the standardization factors and the index methodology visit our Web site:

To address the problem of lags in available data, those leading and coincident indicators that are not available at the time of publication are estimated using statistical imputation. An autoregressive model is used to estimate each component. The resulting indexes are constructed using real and estimated data, and will be revised as the data unavailable at the time of publication become available. Such revisions are part of the monthly data revisions, now a regular part of the U.S. Business Cycle Indicators program. The main advantage of this procedure is to utilize in the leading index the data, such as stock prices, that are available sooner than other data on "real" aspects of the economy, such as new orders and changes in inventory. Empirical research by The Conference Board suggests there are real gains in adopting this procedure to make all the indicator series as up-to-date as possible.


The schedule for 2001 for the "Leading Economic Indicators" news release is:
August 2001 data … Thursday, September 27, 2001

All releases are at 9:30 A.M. ET.

With annual benchmark revisions in January 2001, all components of the leading and coincident indexes were updated with all revisions in the underlying component data.

For detailed information on benchmark revisions, visit our website:

ABOUT THE CONFERENCE BOARD. Founded in 1916, The Conference Board is the premier business membership and research network. The Conference Board has become a global leader in helping executives build strong professional relationships, expand their business knowledge and find solutions to a wide range of business challenges. The Board's Economics Program, under the direction of Chief Economist Gail Fosler, is a recognized source of forecasts, economic analysis and objective indicators such as the Leading Economic Indicators and the Consumer Confidence Index.

This role is part of a long tradition of research and education that stretches back to the compilation of the first continuous measure of the cost of living in the United States in 1919. In 1995, The Conference Board assumed responsibility for computing the composite indexes from the U.S. Department of Commerce. The Conference Board now produces business cycle indexes for the U.S., Australia, France, Germany, Korea, Japan, Mexico and the U.K. To subscribe to any of these indexes, please visit or contact the Global Indicators Research Institute at 212-339-0312 or email


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