The coincident index also increased slightly in March, following a decline in February. Industrial production contributed positively to the index in March, more than offsetting the decline in employment. Despite this month's gain, the six-month change in the coincident index has fallen to -0.1 percent (a -0.2 percent annual rate) from September 2007 to March 2008, down from 0.6 percent (about a 1.1 percent annual rate) in the six-month period through December 2007. In addition, the weaknesses among the coincident indicators have been very widespread in recent months. The lagging index continued to increase in March, and as a result, the coincident to lagging ratio continued to decrease for the third consecutive month.
Since the middle of 2007, the leading index has been declining while the coincident index, a measure of current economic activity, has also deteriorated in recent months. In addition, the weaknesses have also become more widespread among the components of both indexes. Meanwhile, real GDP growth slowed substantially to 0.6 percent in the fourth quarter of 2007, down from 4.9 percent in the third quarter and an average of 2.2 percent, annual rate, in the first half of 2007. The current behavior of the composite indexes suggests economic weakness is likely to continue in the near term.
LEADING INDICATORS
Five of the ten indicators that make up the leading index increased in March. The positive contributors - beginning with the largest positive contributor - were real money supply, index of supplier deliveries (vendor performance), interest rate spread, average weekly manufacturing hours and manufacturers' new orders for consumer goods and materials. The negative contributors - beginning with the largest negative contributor - were average weekly initial claims for unemployment insurance (inverted), building permits, stock prices, and index of consumer expectations. Manufacturers' new orders for nondefense capital goods held steady in March.
The leading index now stands at 102 (2004=100). Based on revised data, this index decreased 0.3 percent in February and decreased 0.4 percent in January. During the six-month span through March, the leading index decreased 1.6 percent, with three out of ten components advancing (diffusion index, six-month span equals 30 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 industrial production, personal income less transfer payments, and manufacturing and trade sales. The negative contributor was employees on nonagricultural payrolls.
The coincident index now stands at 107.1 (2004=100). This index decreased 0.2 percent in February and remained unchanged in January. During the six-month period through March, the coincident index decreased 0.1 percent.
LAGGING INDICATORS
The lagging index stands at 111.6 (2004=100) in March, 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, change in labor cost per unit of output, commercial and industrial loans outstanding, and the ratio of consumer installment credit to personal income. The negative contributor was the average prime rate charged by banks. The ratio of manufacturing and trade inventories to sales held steady in March. Based on revised data, the lagging index increased 0.3 percent in February and increased 0.1 percent in January.
