Real GDP grows at 3.9% annual rate in third quarter
22 Nov '07
4 min read
The Conference Board announced that the U.S. leading index decreased 0.5 percent, the coincident index remained unchanged and the lagging index increased 0.3 percent in October.
• The leading index decreased sharply in October, following a small increase in September. Most of the leading indicators contributed negatively to the index in October, led by large declines in housing permits, initial claims for unemployment insurance (inverted), and index of consumer expectations.
Stock prices, real money supply (M2), and manufacturers' new orders for consumer goods and materials were the only components that contributed positively to the index this month.
The leading index fell 0.5 percent (a decline of 1.0 percent, annual rate) from April to October, and the strengths among its components remained balanced with the weaknesses during the past six months.
• The coincident index was unchanged in October, for the first time in 2007, following steady increases since the beginning of the year.
Employees on nonagricultural payrolls, personal income less transfer payments, and manufacturing trade and sales made small positive contributions to the index this month, but these gains were offset by the decline in industrial production.
The coincident index increased 0.9 percent (a 1.8 percent annual rate) from April to October, which is modestly below the 1.1 percent pace in recent months (about a 2.3 percent annual rate).
However, the strengths among the coincident indicators remain very widespread. In addition, the lagging index continued to increase in October, and as a result, the ratio of the coincident index to the lagging index continued to decrease.
• The leading index has been essentially flat in 2007, continuing the yearlong pattern of alternating monthly increases and decreases, and it has gradually returned to its August 2006 level.
Meanwhile, real GDP grew at a 3.9 percent annual rate in the third quarter, moderately stronger than the 2.2 percent average annual rate in the first half of the year.
The behavior of the composite indexes so far continues to suggest that risks for economic weakness persist, but economic growth should continue in the near term, albeit at a slower pace.
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