The Conference Board announced today that the leading index for Germany increased 0.2 percent, while the coincident index increased 0.1 percent in September.

• With September's gain, the leading index has increased in five of the last six months. The leading index has now increased at a 3.5 percent annual rate since March (its most recent low), up from about a 3.5 percent annual rate of decline in the second half of 2002 to early 2003.
• The coincident index increased slightly in September, but this was offset by a large revision to August. The coincident index remained on a downward trend in the third quarter but there was an improvement because the rate of decline moderated relative to the first half of the year. Correspondingly, there was a slight improvement in real GDP growth from small declines in the first half of the year to a small increase in the third quarter.
• The pick up in the leading index since March has been signaling an improvement in economic growth during the second half of the year, and this started in the third quarter. In addition, this month's increase makes it more likely that the long decline in the leading index over the preceding three years has finally come to an end.

LEADING INDICATORS. Six of the eight components in the leading index increased in September. The positive contributors to the leading index - in order from the largest positive contributor to the smallest - are new orders in investment goods industries, new residential construction orders, stock prices, gross enterprises and properties income*, the inventory change series*, and the yield spread. The growth rate of CPI for services remained unchanged while consumer confidence declined in September.

With a 0.2 percent increase in September, the leading index now stands at 101.2 (1990=100). Based on revised data, this index increased 0.2 percent in August and increased 0.6 percent in July. During the six-month span through September, the leading index increased 1.7 percent, with five of the eight components increasing (diffusion index, six-month span equals 62.5 percent).

COINCIDENT INDICATORS. Two of the four components that make up the coincident index increased in September. The positive contributors to the coincident index were employed persons and manufacturing sales. Retail trade and industrial production decreased in September.

With a 0.1 percent decline in September, the coincident index now stands at 107.7 (1990=100). Based on revised data, this index declined 0.8 percent in August and increased 0.1 percent in July. During the six-month period through September, the coincident index decreased 1.8 percent, with only one of the four components increasing (diffusion index, six-month span equals 12.5 percent).

*See notes under data availability

The next release is scheduled for December 22, 2003 at 9:30 A.M. (ET) In Germany -December 22, 2003 at 3:30 P.M. (CET)

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 November 21, 2003. Some series are estimated as noted below.

NOTES: Series in the leading index for Germany that are based on The Conference Board estimates are inventory change and gross enterprises and properties income.

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Professional Contacts at The Conference Board:
Indicator Program: 1-212-339-0336

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

Email: indicators@conference-board.org
Website: http://www.globalindicators.org

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 (annualized), 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 site:www.globalindicators.org.

Germany Composite Indexes: Components and Standardization Factors

	Leading Index	Factor
1.	New Orders, Investment Goods	.0845
2.	Yield Spread, 10 year minus 3 month	.3295
3.	Change in Inventories	.1250
4.	Gross Enterprise and Property Income	.0761
5.	Stock Prices	.0321
6.	New Orders, Residential Construction	.0556
7.	Growth Rate for Consumer Price Index for Services	.1918
8.	Consumer Confidence Index	.1055
	Coincident Index
1.	Manufacturing Sales	.1958
2.	Industrial Production	.4074
3.	Retail sales	.3499
4.	Persons Employed	.0469

Notes:
The standardization 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 are revised effective with the May 22, 2003 release, and all historical values for the two composite indexes have been revised to reflect these 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 1992-2000 as the sample period for measuring volatility for the leading index, and 1991-2000 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: www.globalindicators.org.

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.

NOTICES

Release Schedule:

October 2003 Data..... Monday, December 22, 2003

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, Spain and the U.K. To subscribe to any of these indexes, please visit www.globalindicators.org or contact the Global Indicators Research Institute at 212-339-0330 or email indicators@conference-board.org.

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