Leading Economic Indicators Rise Again

The Index of Leading Economic Indicators rose for the third straight month in June, reinforcing hopes that the recession is nearing an end, even as a companion index showed actual economic activity continues to decline.

The Conference Board's Leading Economic Index rose 0.7 percent in June, slightly surpassing economists' expectations. The index, which is regarded as a key forecast of future economic activity, is now up 2.0 percent in the first half of the year (a 4.1 percent annual rate), compared to a 3.1 percent decline (6.2 percent annual rate) in the second half of 2008.

It's the highest rate of growth the index has shown since the first quarter of 2006. The figures given increasing support to predictions that the recession will end in the third or fourth quarter of 2009. At the same time, the companion Index of Current Economic Indicators fell again in June, as unemployment continued to rise and industrial production continued to fall.

The current index fell 3.0 percent in the first half of the year (5.9 percent annual rate), slightly faster than the 2.8 percent decline (5.6 percent annual rate) posted in the second half of 2008. However, the Conference Report notes that the pace of the decline has slowed slightly in recent months, suggesting that the recession may be easing.

Gross Domestic Product (GDP) declined at a 5.5 percent annual rate in the first quarter of the year, a slight improvement over the 6.3 percent annual rate of decline posted in the last quarter of 2008.

Seven of the 10 factors making up the Index of Leading Economic Indicators showed improvement in June, including building permits, stock prices, initial unemployment claims, manufacturing hours and new orders for consumer goods. Still declining, however, were real money supply, orders for nondefense capital goods and the index of consumer expectations.

The decline in the Index of Current Economic Indicators was driven by falling nonagricultural payrolls and industrial production. However, the other two indicators in the index, personal income and sales of manufactured and trade goods - both posted improvements.

The Conference Board is a 90-year-old global nonprofit organization that publishes economic information, analyses and forecasts in order to strengthen business performance and serve the public interest.