The Conference Board announced today that the U.S. leading index increased 0.3 percent, the coincident index increased 0.2 percent and the lagging index decreased 0.1 percent in March.

The leading index turned up again in March after pausing in February. The leading index has now increased by 4.4 percent from its most recent low in March 2003, although growth has slowed somewhat in recent months.
The coincident index continued on its steady upward trend in March. The coincident index has now increased at a 2.2 percent annual rate from its most recent low in April 2003. The growth rate of the coincident index has strengthened in recent months, and this strength has been widespread.
The upturn in the leading index since March 2003 signaled stronger economic growth, and correspondingly, real GDP growth picked up to a 6.2 percent annual rate in the second half of 2003. The current growth rate of the leading index is signaling a continuation of relatively strong economic growth in the near term.
Leading Indicators. Six of the ten indicators that make up the leading index increased in March. The positive contributors - beginning with the largest positive contributor – were vendor performance, real money supply*, average weekly initial claims for unemployment insurance (inverted), building permits, manufacturers’ new orders for consumer goods and materials*, and index of consumer expectations. The negative contributors - beginning with the largest negative contributor – were interest rate spread, stock prices, average weekly manufacturing hours, and manufacturers’ new orders for nondefense capital goods*.

The leading index now stands at 115.3 (1996=100). Based on revised data, this index remained unchanged in February and increased 0.4 percent in January. During the six-month span through March, the leading index increased 1.8 percent, with seven out of ten components advancing (diffusion index, six-month span equals 70 percent).

Coincident Indicators.Three of the four indicators that make up the coincident index increased in March. The positive contributors to the index - beginning with the largest positive contributor - were employees on nonagricultural payrolls, personal income less transfer payments*, and manufacturing and trade sales*. The negative contributor was industrial production.

The coincident index now stands at 116.4 (1996=100). This index increased 0.3 percent in February and increased 0.1 percent in January. During the six-month period through March, the coincident index increased 1.3 percent.

Lagging Indicators.The lagging index stands at 97.9 (1996=100) in March, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were change in CPI for services, average duration of unemployment (inverted), change in labor cost per unit of output*, and ratio of consumer installment credit to personal income*. The negative contributor was commercial and industrial loans outstanding*. The ratio of manufacturing and trade inventories to sales* and average prime rate charged by banks held steady in March. Based on revised data, the lagging index decreased 0.1 percent in February and increased 0.1 percent in January.

Data Availability and Notes. 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 April 16, 2004. Some series are estimated as noted below.

* 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 CPI for services 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.

Effective with the September 18, 2003 release, the method for calculating manufacturers’ new orders for consumer goods and materials (A0M008) and manufacturers’ new orders for nondefense capital goods (A0M027) has been revised. Both series are now constructed by deflating nominal aggregate new orders data instead of aggregating deflated industry level new orders data. Both the new and the old methods utilize appropriate producer price indices. This simplification remedies several issues raised by the recent conversion of industry data to the North American Classification System (NAICS), as well as several other issues, e.g. the treatment of semiconductor orders. While this simplification caused a slight shift in the levels of both new orders series, the growth rates were essentially the same. As a result, this simplification had no significant effect on the leading index.

Effective with the January 22, 2004 release a programming error in the calculation of the leading index -- in place since January 2002 -- has been corrected. The cyclical behavior of the leading index was not affected by either the calculation error or its correction, but the level of the index in the 1959-1996 period is slightly higher.