The 2020 Mid-Year Economic Update_long

Conference Board Leading Economic Index Increases in July

Indicators pointing to slow growth through the remainder of 2012.

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.4 percent in July, following a 0.4 percent decline in June, and a 0.3 percent increase in May. The Coincident Economic Index (CEI) increased 0.3 percent, and the Lagging Economic Index (LAG) increased 0.4 percent.

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\”With this month’s increase, the U.S. LEI returned to its May level,\” says Ataman Ozyildirim, economist at The Conference Board. \”The majority of its components improved, led by large contributions from housing permits and initial unemployment claims. The LEI’s six-month growth rate seems to be stabilizing, pointing to a continuing but slow expansion in economic activity for the rest of the year.\”

The LEI for the U.S. now stands at 95.8 (2004=100). In the six-month period ending July 2012, the leading economic index increased by 1.2 percent (about a 2.3 percent annual rate), faster than the growth of 0.3 percent (about a 0.6 percent annual rate) during the previous six months. However, the strengths among the leading indicators have become somewhat less widespread in recent months.

The Coincident Economic Index – a measure of current economic activity – has risen slowly, but steadily in recent months and now stands at 105.1. The index rose by 1.4 percent (about a 2.7 percent annual rate) between January and July 2012, slightly slower than the increase of 1.8 percent (about a 3.6 percent annual rate) for the previous six months. However, the strengths among the coincident indicators have remained very widespread, with all components advancing over the past six months.

The lagging economic index continued to increase, but at a faster pace than the CEI, and as a result the coincident-to-lagging ratio declined marginally. The lagging economic index now stands at 116.0.

Real GDP expanded at an annual rate of 1.5 percent in the second quarter of 2012, after increasing by 2.0 percent (annual rate) in the first quarter.

\”The indicators point to slow growth through the end of 2012,\” says Ken Goldstein, economist at The Conference Board. \”Lack of domestic demand remains a big issue. However, back-to-school sales are better than expected, suggesting that the consumer is starting to come back. Retail sales this time of year are often an indicator of how the holiday season will turn out.\”

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