Positive Trend Seen in Economic Indicators

The Conference Board's latest summary of leading economic indicators (LEI) suggests that the U.S. economy is on the mend. The composite LEI increased by 0.6% between December 2001 and January 2002, its fourth consecutive month of improvement following stagnation throughout the first three quarters of last year.

The LEI is a composite measure of 10 widely varied economic indicators that, when the components are melded together and appropriately weighted, has shown to have been a reliable indicator of changes in overall economic activity for the period six to nine months down the road. Thus, it is intended to serve as an early warning sign of economic conditions.

Six of the 10 indicators that make up the LEI rose during the first month of the new year. Positive contributors to the index's movement included gains in the University of Michigan's index of consumer expectations, building permits, money supply, and a decline in weekly initial claims for unemployment insurance. The negative contributors to the LEI in January were the still-declining levels of average weekly hours worked by manufacturing sector employees, falling stock prices, and continued weakness in new orders for both consumer and non-defense capital goods.