The U.S. leading index, a key barometer of economic conditions, grew 0.2 percent in December, The Conference Board reported today.
The leading index now stands at 115.4 (1996=100). Based on revised data, this index increased 0.3 percent in November and decreased 0.3 percent in October. During the six-month span through December, the leading index decreased 0.9 percent, with six out of 10 components advancing.
These two consecutive increases in the leading index follow five consecutive declines, and the weakness in the leading indicators has become somewhat less widespread. It is now more likely that the five-month decline in the leading index was only a pause in the rising trend that has been underway since March 2003.
The growth rate of the leading index slowed below its long-term trend (a 1.5 percent annual rate) in the second half of 2004, but not to a rate that has historically been associated with a recession. The behavior of the leading index since the middle of 2004 is consistent with the economy continuing to expand in the near term, but more slowly than its long-term trend rate.
Four of the 10 indicators that make up the leading index increased in December. The positive contributors – beginning with the largest positive contributor – were index of consumer expectations, stock prices, real money supply, and average weekly initial claims for unemployment insurance (inverted). The negative contributors – beginning with the largest negative contributor – were vendor performance, interest rate spread, manufacturers’ new orders for nondefense capital goods, building permits, and manufacturers’ new orders for consumer goods and materials. The average weekly manufacturing hours held steady in December.
The coincident index, an index of current economic activity, increased again in December by 0.3 percent, and the strength in the coincident index continues to be widespread. At the same time, real GDP growth in the third quarter was revised up slightly to a 4 percent annual rate, a pickup from 3.3 percent growth in the second quarter.
The Conference Board is as nonprofit research and business group.
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