The U.S. leading index, a key barometer of economic conditions, increased 0.9 percent in October, the Conference Board reported today.

The leading index now stands at 137.9. Based on revised data, this index decreased 0.8 percent in September and remained unchanged in August. During the six-month span through October, the leading index increased 1.2 percent, with seven out of 10 components advancing.

The leading index increased sharply in October offsetting the large decrease in September, which partly reflects the economic impact of the hurricanes, which hit the Gulf region in late August and September. In addition, October’s increase was widespread among the leading indicators, with seven of the 10 indicators advancing. The largest positive contributors to the leading index were (inverted) initial claims for unemployment insurance and average weekly hours in manufacturing, whereas the largest negative contributors were housing permits and stock prices.

The leading index has slowed steadily since mid-2004 and it grew almost at a 1 percent annual rate since January. In the same period in 2004, it grew almost 4 percent. The leading index has been fluctuating around a relatively flat trend throughout 2005 and is now essentially at the same level as mid-2005. Although it is still difficult to distinguish between the impact of the hurricanes and overall economic conditions, the recent behavior of the leading index is still consistent with the economy continuing to expand more moderately in the near term.

The coincident index, a measure of current economic activity, increased slightly in October. The coincident index has been increasing at a relatively steady 2.5 percent annual rate since April 2003, but its growth rate has moderated as personal income and industrial production registered declines in recent months. At the same time, real GDP grew at a 3.8 percent annual rate in the third quarter of 2005 (advance estimate), following a 3.3 percent rate in the second quarter.

The Conference Board is a nonprofit research and business group.

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