Economy Trends Upward

Chart of the Week for September 19-26, 2003

The Conference Board’s Index of Leading Economic Indicators posted a fifth consecutive gain in August. The Index is made up of the following ten data series: 1) spread between the 10-year Treasury and the Fed funds rate, 2) the M2 money supply, 3) the average workweek in manufacturing, 4) manufacturers’ new orders for consumer goods, 5) the S&P 500 Index, 6) average weekly initial unemployment claims, 7) vendor performance component of the National Purchasing Managers index, 8) housing permits, 9) consumer expectations, and 10) manufacturers’ new orders for nondefense capital goods. Only four of the ten indicators improved from August levels; however, increases in two of the three most heavily weighted components helped propel the index higher.

Two of these heavier weighted components, the M2 money supply and the spread between the 10-year Treasury and the Fed Funds rate, increased mainly due to Government initiated fiscal stimulus. Recent comments by the Fed suggest that this stimulus will continue as inflation remains low and economic growth continues in fits and starts.

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