Economic growth should persist

The Conference Board announced today that the U.S. leading index increased 0.5 percent, the coincident index increased 0.3 percent and the lagging index was unchanged in January. The continued growth in the leading index of about a 5.5 percent annual rate, excluding the recent weakness in the money supply, is signaling that strong economic growth should persist in the near term, the business organization said.

The 0.5 percent gain in the leading index was the largest increase since October. The leading index has now increased at a 5 percent annual rate from its most recent low in March, and this growth has continued to be widespread. The one exception has been the real money supply, which continued downward in January.

The coincident index has now grown at a 2 percent annual rate from its most recent low in April. Every component–production, sales, income, and employment–has contributed to the growth of the coincident index.

Real gross domestic product increased at a 6.1 percent annual rate during the second half of 2003, consistent with the pickup in the leading index that began in the second quarter.

Five of the 19 indicators that make up the leading index increased in January. The positive contributors, beginning with the largest positive contributor, were the index of consumer expectations, stock prices, average weekly manufacturing hours, vendor performance and average weekly initial claims for unemployment insurance (inverted). The negative contributors, beginning with the largest negative contributor, were building permits, interest rate spread, real money supply and manufacturers’ new orders for nondefense capital goods. Manufacturers’ new orders for consumer goods and materials remained unchanged.

The leading index now stands at 115 (1996=100). This index increased 0.2 percent in December and increased 0.3 percent in November. During the six-month span through January, the leading index increased 2 percent, with 8 out of 10 components advancing.