The U.S. leading index, a key barometer of economic conditions, fell 0.3 percent in January, The Conference Board reported today.

The leading index now stands at 115.6 (1996=100). Based on revised data, this index increased 0.3 percent in December and increased 0.3 percent in November. During the six-month span through January, the leading index decreased 0.3 percent, with five out of 10 components advancing.

Despite January’s decline there were significant upward revisions to the leading index from August to December. In addition, there has been more widespread strength in the leading indicators in recent months, with weakness concentrated in vendor performance and the interest-rate spread

The leading index was on a rising trend from early 2003 to the middle of 2004, but has now fluctuated around a flat trend over the last six or seven months (which is below its long-term trend of a 1.5 percent annual rate). The recent behavior of the leading index is consistent with the economy continuing to expand in the near term, but more slowly than its long-term average growth rate.

Four of the 10 indicators that make up the leading index increased in January. The positive contributors – beginning with the largest positive contributor – were average weekly manufacturing hours, real money supply, building permits, and manufacturers’ new orders for nondefense capital goods. The negative contributors – beginning with the largest negative contributor – were vendor performance, index of consumer expectations, stock prices, interest-rate spread, manufacturers’ new orders for consumer goods and materials. The contribution of average weekly initial claims for unemployment insurance (inverted) remained unchanged.

The coincident index, an index of current economic activity, held steady in January, and the strength in the coincident index continues to be widespread. At the same time, the growth rate of real GDP has been fluctuating around a 3.5 percent annual rate since the second quarter of 2004, including 3.1 percent in the fourth quarter.

The Conference Board is as nonprofit research and business group.

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