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U.S. leading economic index increased 0.3%
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The U.S. LEI increased 0.3 percent, The Conference Board Coincident Economic Index (CEI) decreased 0.5 percent and The Conference Board Lagging Economic Index (LAG) decreased 0.4 percent in December.
The LEI rose modestly in December, mainly due to the continued and very large positive contribution from real money supply. The yield spread also contributed positively to the index, helping offset the continued declines in building permits, the average workweek, supplier deliveries, and initial unemployment claims. Since June 2008, the LEI has fallen 2.5 percent (a -5.0 percent annual rate), faster than the 0.9 percent decline (a -1.7 percent annual rate) during the previous six months through June 2008. In addition, the weaknesses among the leading economic indicators have remained widespread.
The CEI fell sharply in December, amid a further contraction in industrial production and employment. The six-month change in the CEI has continued to decline — to -2.2 percent (a -4.3 percent annual rate) in the period through December, down significantly from -0.7 percent (a -1.3 percent annual rate) from December 2007 to June 2008, and the weaknesses among its components have remained widespread in recent months. The lagging economic index (LAG) decreased less than the CEI this month, and as a result, the coincident-to-lagging ratio fell again. Meanwhile, real GDP contracted at a 0.5 percent annual rate in the third quarter of 2008, down from a 1.8 percent average annual rate of increase for the previous two quarters.
Despite December's modest increase in the LEI, it is about 5.0 percent lower than its most recent peak in July 2007 as a result of widespread declines among its components. And, it would have been weaker without the very large expansion in inflation-adjusted money supply in the last four months. The CEI has been deteriorating since its most recent peak in November 2007, and the decrease in this index over the past six months is the largest since 1980. Taken together, the recent behavior of the composite economic indexes suggests that the recession that began in December 2007 will continue in the near term.
Posted: January 26, 2009 Monday 10:00 AM