COINCIDENT INDEX SHOWS ECONOMIC GROWTHLAGGING INDEX IS FLAT
GM STRIKE IS STILL IMPACTING UNEMPLOYMENT DATA
Today the Conference Board released its February report on the composite indexes of coincident and lagging economic indicators. This report was delayed a couple days because of postponements in the publication of data by the government. In the past, reports on the leading, coincident, and lagging composite indexes have all been published together. But, this month and, according to the Conference Board, next month there will be delays in releasing the coincident and lagging data. The next release of the composite indexes is scheduled for May 1, but the Board does not expect to have data to update the coincident and lagging indexes on that date. The Board plans to release the leading index for March on May 1 and to announce on that date when the other two indexes will be updated.
The composite indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. Historically, the cyclical turning points in the leading index have occurred before those in aggregate economic activity, while the cyclical turning points in the coincident index have occurred at about the same time as those in aggregate economic activity. The cyclical turning points in the lagging index generally have occurred after those in aggregate economic activity.
The composite index of coincident indicators increased 0.8 percent in February to 119.4. Based on revised data, the coincident index decreased 0.4 percent in January and increased 0.3 percent in December. The January decrease was the only drop in the past seven months, and was more than compensated for by the sharp increase in February. During the first part of 1995, the coincident index seemed to be leveling off, and perhaps turning down. But, since May, the index has been working its way generally higher. During that nine-month period, the index advanced six times, declined twice, and was unchanged once while advancing overall by 2.4 percent. This translates into an annualized rate of 3.2 percent. It certainly seems that those three 1/4 percent reductions in the Fed Funds rate helped to turn the direction of the economy upward.
For you Today's Pitch players who have been waiting for today's results: In the most-recently-reported month, Employees in Nonfarm Payrolls rose, Personal Income Less Transfer Payments rose, Industrial Production Rose, and Manufacturing and Trade Sales fell. So, "It's A Homer" for those of you who predicted that THREE of the four components of the Composite Index of Coincident Economic Indicators would rise.
The composite index of lagging indicators decreased 0.5 percent in February to 102.5. Four of the five available components showed decreases. Based on revised data, the lagging index increased 0.5 percent in January and increased 0.1 percent in December. The offsetting changes in January and February were typical of the behavior of this index for the past eight months. During that period, the index advanced three times, declined twice, and was unchanged three times while advancing overall by a miniscule 0.2 percent. So, the present trend of this index is flat.
The Labor Department's Employment and Training Administration announced today that new claims for unemployment insurance stood at the 408,000 level for the week ending March 30. This was down by 25,000 from the number of claims in the preceding week. But, the four-week moving average of new claims rose to 394,750 -- the highest level since October 1992. This week's numbers were still influenced by the GM strike, which was settled on March 21. So, it will take at least a couple more weeks before the last week of the strike is factored into the four-week moving average. Following that, there may still be some residual effects due a time lag in getting production back up to full capacity. The most-recent value for the four-week moving average is 15.42 percent higher than a year ago. This indicator remains in a definite upward trend.
Byline: Lafferty (MF Merlin)