Four of the ten significant economic indicator components increased in August 2003; main positive contributors were interest-rate spreads and excellent vendor performance. The most significant negative contributors were average initial jobless claims and the index of consumer expectations. The average factory workweek was unchanged. This was the fourth straight monthly increase for the index. Over the six months from February to August, the index increased by 2.4%.
The composite indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading, coincident, and lagging indexes are essentially composite averages of between four and ten individual leading, coincident, or lagging indicators. They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component-primarily because they smooth out some of the volatility of individual components.
The lagging index held steady at 98.1 (1996=100) in August, with four of the seven components advancing (Council of Economic Advisers, 2003). The positive contributors to the index - beginning with the largest positive contributor - were average duration of unemployment (inverted), change in labor cost per unit of output, ratio of consumer installment credit to personal income, and ratio of manufacturing and trade inventories to sales. The two negative contributors were commercial and industrial loans outstanding* and change in CPI for services. Average prime rate charged by banks held steady in August. The lagging index increased 0.1 percent in July and decreased 0.9 percent in June.
With the increase of 0.3 percent in July, the leading indictor component now stands at 101.8 (1990=100). Based on revised data, this index decreased 0.2 percent in June and increased 0.1 percent in May (Council of Economic Advisers, 2003). During the six-month span through July, the leading index....
