The coincident index, a measure of current economic activity, declined in May, the second time in the last three months, as both industrial production and manufacturing sales made large negative contributions. Between November 2007 and May 2008, the coincident index increased by 0.7 percent (about a 1.5 percent annual rate), the same as the growth rate for the previous six months, but the index is essentially at the same level as January 2008. In addition, the strengths among the coincident indicators have been more widespread than the weaknesses in recent months.
Since its July 2007 peak, the leading index has been on a sharp downward trend, declining by 5.5 percent during this period. At the same time, the coincident index has been flat since the beginning of 2008 after growing at a steady pace throughout 2007. Although real GDP growth picked up in the first quarter to a 6.3 percent annual rate (up from a 1.9 percent average annual rate during the second half of 2007), the recent behavior of the composite indexes, taken together, suggests that the recent rapid economic growth is not likely to persist, and that risks for economic weakness going forward continue to increase.
LEADING INDICATORS
Three of the seven components in the leading index increased in May. The positive contributors to the leading index - in order from the largest positive contributor to the smallest - are stock prices, inventory change series, and gross enterprises and properties income. The negative contributors - in order from largest to smallest - are new orders in investment goods industries, consumer confidence, new residential construction orders and yield spread.
With the 1.0 percent decrease in May, the leading index now stands at 94.7 (1990=100). Based on revised data, this index declined 0.5 percent in April and declined 0.7 percent in March. During the six-month span through May, the leading index decreased 4.3 percent, with one of the seven components increasing (diffusion index, six-month span equals 14.3 percent).
COINCIDENT INDICATORS
Two of the four components that make up the coincident index increased in May. The positive contributors to the coincident index were retail trade and employed persons. Industrial production and manufacturing sales declined in May.
With the 0.3 percent decrease in May, the coincident index now stands at 110.7 (1990=100). Based on revised data, this index increased 0.3 percent in April and decreased 0.3 percent in March. During the six-month period through May, the coincident index increased 0.7 percent, with three of the four components increasing (diffusion index, six-month span equals 75.0 percent).
