The Conference Board announced that the U.S. leading index increased 0.4 percent, the coincident index increased 0.2 percent and the lagging index increased 0.2 percent in October.

The leading index increased by 0.4 percent in October. September’s originally-reported 0.2 percent decline was revised up to a 0.0 percent change. The coincident index increased moderately again in October, following an upwardly revised increase in September (which partly reflected the upward revision to payroll employment).

The leading index has now increased at a 5.7 percent annual rate over the last six months and this increase has been extremely widespread. Consistent with the pick-up in the leading index, the growth rate of the coincident index strengthened, and real GDP growth jumped to a 7.2 percent annual rate in the third quarter.
The continued growth in the leading index, despite recent declines in the money supply, suggests that strong economic growth should continue in the near term.

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

The leading index now stands at 113.6 (1996=100). Based on revised data, this index remained unchanged in September and increased 0.4 percent in August. During the six-month span through October, the leading index increased 2.8 percent, with all ten components advancing (diffusion index, six-month span equals 100 percent).

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

The coincident index now stands at 116.0 (1996=100). This index increased 0.2 percent in September and held steady in August. During the six-month period through October, the coincident index increased 0.9 percent.

Lagging Indicators.
The lagging index stands at 97.5 (1996=100) in October, with five of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were average duration of unemployment (inverted), change in CPI for services, ratio of consumer installment credit to personal income*, change in labor cost per unit of output* and ratio of manufacturing and trade inventories to sales*. The only negative contributor was commercial and industrial loans outstanding*. The average prime rate charged by banks held steady in October. Based on revised data, the lagging index decreased 0.6 percent in September and decreased 0.1 percent in August.

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 November 19, 2003. 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 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.

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.

The next release is scheduled for December 18, 2003 at 10 A.M. ET.