U.S. Leading Index declines by 0.7% in July

The Conference Board announced that their U.S. Leading index decreased by 0.7% in July. Building permits, stock prices, average weekly initial claims for unemployment insurance (inverted), real money supply, and manufacturers’ new orders for consumer goods and materials had negative contributions to the index.  The interest rate spread, index of consumer expectations, and manufacturers’ new orders for nondefense capital goods had positive contributions.  Average weekly manufacturing hours and the index of supplier deliveries (vendor performance) were flat for the month.

Here are charts of 5 of the 10 components:

Sphere: Related Content

U.S. Leading index posts second small increase in a row

The Conference Board announced that their U.S. Leading index increased by 0.1% in April.  The leading index increased for the second month in a row after declining 5 months in a row.  Stock prices, the interest rate spread, and housing permits made large positive contributions that offset large declines in average weekly hours and consumer expectations.

Here are charts of 5 of the 10 components:

The interest spread made another positive contribution to the Leading Index, but as mentioned in last month's post, the spread normally widens during a recession.

Sphere: Related Content

U.S. Leading Index posts small increase after 5 months of decline

The Conference Board announced that the U.S. Leading Index increased by 0.1%. The Leading Index had declined for five consecutive months. There are 10 indicators that make up the leading index. M2, the index of supplier deliveries (vendor performance), and the interest rate spread had large positive contributions that offset the large negative contributions from initial unemployment claims, building permits, and stock prices. Average weekly manufacturing hours and manufacturers’ new orders for consumer goods and materials had small gains. Manufacturers’ new orders for nondefense capital goods was unchanged and the index of consumer expectations had a small decline. Here are five of the charts going back to 1998.







M2 and the interest spread indicators are making positive contributions to the leading index. However, looking back to 1960 both of these indicators often bottom at the beginning of a recession and peak after the recession has ended (making positive contributions through the recession). These two indicators are acting like we are in a recession (even though they are giving large positive contributions to the leading index).

Sphere: Related Content

U.S. Leading Index

On Friday, the Conference Board published the December 2007 numbers for the U.S. Leading Index, which is released monthly.

The Leading Index decreased 0.2%. Paul L. Kasriel, Senior Vice President & Director of Economic Research for The Northern Trust Company, wrote a good article on the Leading Index and furnished this chart.



The index is made up of 10 components. 2 of the components can be updated daily:

• The S&P 500


• The interest rate spread of the 10-year Treasury bonds less federal funds.

3 of the components are released weekly:

• “Average weekly hours, manufacturing”


• “Average weekly initial claims for unemployment insurance”


• Money supply, M2

The rest of the 5 factors are released monthly.

• “Vendor performance, slower deliveries diffusion index” is released at the beginning of the month.


• “Index of consumer expectations” is released at the end of the previous month.


• “Building permits, new private housing units” is released right before the Leading Index comes out.


• “Manufacturers' new orders, consumer goods and materials” is estimated using statistical imputation.


• “Manufacturers' new orders, nondefense capital goods” is estimated using statistical imputation.

The Leading index does not carry too much weight with the stock market. A large part is due to the fact that most of the components are know ahead of time. The release of the index is old news when it hits. The Conference Board also heavily revises the weights to better forecast the business cycle.

This is not to say that the index or the components are not important indicators (just not breaking news).

Here are charts on 4 of the components that can be determined daily or weekly. You can click on them for a larger view.

The employment related charts mirror the official recession dates as declared by the NBER. The M2 and Interest spreads move a bit more independently and sometimes truely lead the recessions.

Sphere: Related Content