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FOR RELEASE: 10:00 A.M. ET, MONDAY, MAY 19, 2003
U.S. COMPOSITE INDEXES FOR APRIL 2003
The Press Release in a PDF file
The Conference Board announced today that the U.S. leading index increased 0.1 percent, the coincident index decreased 0.1 percent, and the lagging index decreased 0.5 percent in April.
- After declining in February and March, the leading index increased slightly in April. Since early 2002, the leading index has been fluctuating around a flat trend. This is consistent with real GDP growth continuing to fluctuate around a 2% to 2.5% average annual rate.
- Despite rebounding financial indicators and consumer expectations, there is still weakness in the labor market and manufacturing indicators. Weakness in these components reflects the recent declines in manufacturing capacity utilization.
- The coincident index, a measure of current economic conditions, decreased in April after holding steady in March. The slight decline in the coincident indicators in April is consistent with the weakness in the leading index in the first quarter of 2003.
LEADING INDICATORS. Five of the ten indicators that make up the leading index increased in April. The positive contributors - beginning with the largest positive contributor - were index of consumer expectations, real money supply*, stock prices, interest rate spread, and building permits. The negative contributors to the index - beginning with the largest negative contributor - were vendor performance, average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, and manufacturers' new orders for nondefense capital goods*. Manufacturers' new orders for consumer goods and materials* held steady in April.
The leading index now stands at 110.6 (1996=100). This index decreased 0.2 percent in March and decreased 0.5 percent in February. During the six-month span through April, the leading index increased 0.2 percent, with four of the ten components advancing (diffusion index, six-month span equals 40 percent).
COINCIDENT INDICATORS. Two of the four indicators that make up the coincident index increased in April. The positive contributors to the index - beginning with the larger positive contributor - were personal income less transfer payments* and manufacturing and trade sales*. Industrial production and employees on nonagricultural payrolls declined in April.
The coincident index now stands at 114.9 (1996=100). Based on revised data, this index held steady in March and decreased 0.4 percent in February. During the six-month period through April, the coincident index decreased 0.3 percent.
The next release is scheduled for June 19, 2003 at 10 A.M. ET.
LAGGING INDICATORS. The lagging index decreased 0.5 percent to 98.9 (1996=100) in April, with five of the seven components declining. The negative contributors to the index - beginning with the largest negative contributor - were average duration of unemployment, change in CPI for services, commercial and industrial loans outstanding*, ratio of consumer installment credit to personal income*, and change in labor cost per unit of output*. The positive contributor to the index was ratio of manufacturing and trade inventories to sales*. Average prime rate charged by banks held steady in April. Based on revised data, the lagging index decreased 0.1 percent in March and held steady in February.
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 May 16, 2003. 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.
The procedure used to estimate the current month's personal consumption expenditure deflator (used in the calculation of real money supply and commercial and industrial loans outstanding) now incorporates the current month's consumer price index when it is available before the release of the U.S. Leading Economic Indicators.
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Professional Contacts at The Conference Board:
Ken Goldstein: 212-339-0331
Ataman Ozyildirim 212-339-0399
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 Index | Factor |
| 1. | Average weekly hours, manufacturing | .1946 |
| 2. | Average weekly initial claims for unemployment insurance | .0268 |
| 3. | Manufacturers' new orders, consumer goods and materials | .0504 |
| 4. | Vendor performance, slower deliveries diffusion index | .0296 |
| 5. | Manufacturers' new orders, nondefense capital goods | .0139 |
| 6. | Building permits, new private housing units | .0205 |
| 7. | Stock prices, 500 common stocks | .0309 |
| 8. | Money supply, M2 | .2775 |
| 9. | Interest rate spread, 10-year Treasury bonds less federal funds | .3364 |
| 10. | Index of consumer expectations | .0193 |
| | Coincident Index | |
| 1. | Employees on nonagricultural payrolls | .5186 |
| 2. | Personal income less transfer payments | .2173 |
| 3. | Industrial production | .1470 |
| 4. | Manufacturing and trade sales | .1170 |
| | Lagging Index | |
| 1. | Average duration of unemployment | .0368 |
| 2. | Inventories to sales ratio, manufacturing and trade | .1206 |
| 3. | Labor cost per unit of output, manufacturing | .0693 |
| 4. | Average prime rate | .2692 |
| 5. | Commercial and industrial loans | .1204 |
| 6. | Consumer installment credit to personal income ratio | .1951 |
| 7. | Consumer price index for services | .1886 |
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 January 2003, 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 1984-2001 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 1959-2001. 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:
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.
AVAILABLE FROM THE CONFERENCE BOARD
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(Includes monthly release, data, charts and commentary)
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(Sample available on request)
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