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FOR RELEASE: 10:00 A.M. ET, THURSDAY, DECEMBER 19, 2002

U.S. COMPOSITE INDEXES FOR NOVEMBER 2002

The Press Release in a PDF file

The Conference Board announced today that the U.S. leading index increased by 0.7 percent, the coincident index increased by 0.1 percent, and the lagging index decreased 0.2 percent in November.

  • This month's gain in the leading index is the largest since December of last year. With this increase, the index has now recovered its losses since May 2002, and is nearly 3.6 percent above its most recent trough in March 2001.
  • Strength in the financial sector - coupled with a rebound in consumer expectations and a decline in unemployment insurance claims - contributed to the increase in the leading index this month.
  • The coincident index, a measure of current economic activity, increased modestly in November. Despite this increase, the coincident index remains essentially flat since July 2002, reflecting a sluggish recovery from the last recession.

LEADING INDICATORS. Five of the ten indicators that make up the leading index increased in November. The positive contributors to the index - beginning with the largest positive contributor - were stock prices, real money supply*, interest rate spread, average weekly initial claims for unemployment insurance (inverted), and index of consumer expectations. The four negative contributors - from the largest negative contributor to the smallest - were vendor performance, building permits, manufacturers' new orders for nondefense capital goods*, and manufacturers' new orders for consumer goods and materials*. Average weekly manufacturing hours held steady in November.

The leading index now stands at 112.3 (1996=100). Based on revised data, this index increased 0.1 percent in October and decreased 0.4 percent in September. During the six-month span through November, the leading index held steady, with four of the ten components advancing (diffusion index, six-month span equals 40 percent).

COINCIDENT INDICATORS. Three of the four indicators that make up the coincident index increased in November. The positive contributors to the index - beginning with the largest positive contributor - were personal income less transfer payments*, manufacturing and trade sales*, and industrial production. Employees on nonagricultural payrolls decreased in November.

The coincident index now stands at 115.0 (1996=100). Based on revised data, this index held steady in October and decreased 0.1 percent in September. During the six-month period through November, the coincident index increased 0.4 percent.

The next release is scheduled for January 23, 2003 at 10 A.M. ET.

LAGGING INDICATORS. The lagging index decreased 0.2 percent to 99.7 (1996=100) in November. Four of the seven components declined in November. The negative contributors to the index - beginning with the largest negative contributor - were average prime rate charged by banks, commercial and industrial loans outstanding*, average duration of unemployment, and change in CPI for services. The positive contributors to the index were change in labor cost per unit of output* and ratio of manufacturing and trade inventories to sales*. Ratio of consumer installment credit to personal income* held steady in November. Based on revised data, the lagging index held steady in October and decreased 0.5 percent in September.

DATA AVAILABILITY. The data series used by The Conference Board to compute the three composite indexes and reported in the tables in this release are those available "as of" 12 Noon on December 18, 2002. Some series are estimated as noted below.

NOTES: Series in the leading index that are based on The Conference Board estimates are manufacturers' new orders for consumer goods and materials, manufacturers' new orders for nondefense capital goods, and the personal consumption expenditure deflator for money supply. Series in the coincident index that are based on The Conference Board estimates are personal income less transfer payments and manufacturing and trade sales. Series in the lagging index that are based on The Conference Board estimates are inventories to sales ratio, consumer installment credit to income ratio, change in labor cost per unit of output, and the personal consumption expenditure deflator for commercial and industrial loans outstanding.

# # #

Professional Contacts at The Conference Board:
Ken Goldstein: 212-339-0331
Mike Fort: 212-339-0402
Indicators Program: 212-339-0312

Media Contacts:
Randy Poe: 212-339-0234
Frank Tortorici: 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, coincident, and lagging indexes are essentially composite averages of between four and ten individual leading, coincident, or lagging 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. The cyclical turning points in the lagging index generally have occurred after those in aggregate economic activity.

* See notes under data availability.

U.S. Composite Indexes: Components and Standardization Factors
 Leading IndexFactor
1.Average weekly hours, manufacturing.1812
2.Average weekly initial claims for unemployment insurance.0261
3.Manufacturers' new orders, consumer goods and materials.0496
4.Vendor performance, slower deliveries diffusion index.0276
5.Manufacturers' new orders, nondefense capital goods.0130
6.Building permits, new private housing units.0191
7.Stock prices, 500 common stocks.0308
8.Money supply, M2.3038
9.Interest rate spread, 10-year Treasury bonds less federal funds.3305
10.Index of consumer expectations.0183

Coincident Index
1.Employees on nonagricultural payrolls.5230
2.Personal income less transfer payments.2176
3.Industrial production.1407
4.Manufacturing and trade sales.1187

Lagging Index
1.Average duration of unemployment.0378
2.Inventories to sales ratio, manufacturing and trade.1257
3.Labor cost per unit of output, manufacturing.0624
4.Average prime rate.2521
5.Commercial and industrial loans.1300
6.Consumer installment credit to personal income ratio.1992
7.Consumer price index for services.1929

Notes:
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. When one or more components are missing, the other factors are adjusted proportionately to ensure that the total continues to sum to 1.

These factors were revised effective on the release for July 2002, and all historical values for the three composite indexes were revised at this time to reflect the changes. (Under normal circumstances, updates to the leading, coincident, and lagging indexes only incorporate revisions to data over the past six months.) The factors for the leading index were calculated using 1984-2000 as the sample period for measuring volatility. A separate set of factors for the 1959-1983 period is available upon request. The primary sample period for the coincident and lagging indexes was 1959-2000. For additional information on the standardization factors and the index methodology see: "Benchmark Revisions in the Composite Indexes," Business Cycle Indicators December 1997 and "Technical Appendix: Calculating the Composite Indexes" Business Cycle Indicators December 1996, or the Web site: www.globalindicators.org.

To address the problem of lags in available data, those leading, coincident and lagging indicators that are not available at the time of publication are estimated using statistical imputation. An autoregressive model is used to estimate each unavailable component. The resulting indexes are therefore constructed using real and estimated data, and will be revised as the unavailable data during 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 data such as stock prices, interest rate spread, and manufacturing hours that are available sooner than other data on real aspects of the economy such as manufacturers' new orders. Empirical research by The Conference Board suggests that there are real gains in adopting this procedure to make all the indicator series as up-to-date as possible.

U.S. Leading Economic Indicators news release schedule for 2003:

January 23, Thursday for December 2002 data
February 20, Thursday for January 2003 data
March 20, Thursday for February 2003 data
April 21, Monday for March 2003 data
May 19, Monday for April 2003 data
June 19, Thursday for May 2003 data
July 21, Monday for June 2003 data
August 21, Thursday for July 2003 data
September 18, Thursday for August 2003 data
October 20, Monday for September 2003 data
November 20, Thursday for October 2003 data
December 18, Thursday for November 2003 data

All releases are at 10:00AM ET.

ABOUT THE CONFERENCE BOARD. The Conference Board is the premier business membership and research network founded in 1916. It 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. Its Economics Program, under the direction of Chief Economist Gail Fosler, is a recognized source of forecasts, analysis and objective indicators such as Leading Economic Indicators and Consumer Confidence.

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 212-339-0312 or email indicators@conference-board.org.

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