Today the Conference Board announced that the composite index of leading indicators (LEI) increased 0.2 percent in March to 101.7. This followed an increase of 1.3 percent in February and a decrease of 0.6 percent in January.

Six of the eleven leading economic indicators rose in March. The Consumer Expectations Index made the largest positive contribution (+.16). That indicator jumped from 77.8 in February to 86.2 in March. As we learned a few days ago, between March and April the expectations index dropped back to 83.0. The next largest contribution was from the change-in-sensitive-materials-prices index (+.13). While that indicator actually logged a negative reading in March, the March reading was less negative than that for February, and that is interpreted as making a positive contribution to the LEI. Go figure. The third largest contribution was from the change in manufacturers' unfilled orders for durable goods indicator (+.11). This indicator has made consistent, sizable, positive contributions to the index every month for the past six months. M2 money supply ran a close fourth, making a contribution of +.10. The most significant negative contributors to the composite leading index in March were average factory workweek (-.09), manufacturers' new orders for consumer goods and materials (-.07), and average weekly initial claims for state unemployment insurance (-.06).

A postponement in the government's release of income and sales data prevented the calculation of the March coincident and lagging composite indexes. The Conference Board expects to get out a report covering those indexes on May 8. In the past, for many years, the Leading, Lagging, and Coincident Composite Indicators were always published on the same day. It appears that the government shutdowns in late 1995 and early 1996 have somehow introduced a permanent delay into the schedule for data collection and publication of the lagging and coincident indicators.

The next release of the leading index is scheduled for June 3. Using the past few months as a guide, the lagging and coincident indicators will be out sometime during the week following that date.

The National Association of Purchasing Management (NAPM) announced today that the April value for its widely-followed Purchasing Managers Index (PMI) was 50.1. This follows a March reading of 46.9 and a February value of 45.2. The April reading is the first reading above 50 in the past nine months

Each month the NAPM surveys a representative sampling of its members on the status of a variety of indicators related to business conditions at their firms. The PMI is a composite of five different indicators measured by the survey (New Orders, Production, Supplier Deliveries, Inventories, and Employment). In theory, the PMI can vary anywhere between 0% and 100%. But, in practice, the Index has moved in a range between a high of 78% in 1950 and a low 30% in 1980. During the past 5 years it hit a low of 38% in 1991 and a high near 60% in October, 1994. Any reading less than 50% is indicative of weakness in the manufacturing sector.

Thus, the April PMI reading of 50.1% indicates that activity in the manufacturing sector is just barely better than at a standstill. But, if the rate of improvement in the PMI over the past few months persists, better days may be ahead.

Pat Lafferty (MF Merlin)

Transmitted: 6/7/96 5:23 PM (econ228)