South-Western College Publishing - Economics  
Economic Indicators Improve
Subject Index of Leading Economic Indicators
Topic Productivity and Growth
Key Words

Consumer Confidence and The Index of Leading Economic Indicators

News Story

The Conference Board, a private research group, reported that its index of leading economic indicators rose 0.2 percent in November, after declining for the previous five months. The improvement in the index indicates that the American economy is still on a path of growth, although the growth rate has slowed.

The index is intended to predict the path of economic activity over the next three to six months. It currently stands at 115.2, compared to a 2004 high of 116.5 in May. Stock prices, consumer expectations, and manufacturers' new orders for consumer goods and materials were among the six indicators that rose.

Chief economist at Wachovia Securities in Charlotte, N.C. John Silvia said the Conference Board report indicated that "the economy will be slower in mid-2005 than it is today."

"In terms of both duration and degree, the indicators suggest an economy losing forward momentum," said Ken Goldstein, an economist at the New York based Research Group... "But even if economic performance in early 2005 proves sluggish, conditions could brighten by spring."

One of the current bright spots is consumer confidence, which jumped to its highest level since July. The index of consumer confidence shot up to 102.3 in December after recording only a 92.6 level in November. The index was well above the 94 that economists had expected.

The report credited improving labor markets and moderating energy prices as the main reasons for the jump. The report indicates that consumers are feeling more optimistic about their future economic prospects and will be expected to pick up on their spending.

Anthony Chan, senior economist with J.P. Morgan Fleming Asset Management in Columbus, Ohio, said he was "very impressed" with the report, which, he said, "...indicated labor markets are improving nicely, and may actually be a lot healthier than the current perception."

The consumer confidence figures are based on a sampling of 5,000 households and the preliminary report for December was based on about 2,700 received responses. Since consumer spending makes up about two-thirds of all economic activity in the U.S., economists interested in assessing future economic conditions closely watch the measures produced by the Conference Board.

(Updated February, 2005)


What period of time does the index of economic activity cover?

2. The article names three indicators of economic activity. Using any source available, list the other seven.
3. Explain the statement, "The improvement in the index indicates that the American economy is still on a path of growth, although the rate of growth has slowed."
Source The Associated Press, "Economic Indicators Rebound After Five Months of Decline," New York Times Online, December 21, 2004 and The Associated Press, "Consumer Confidence Jumps to Highest Level Since July", The New York Times Online. December 29, 2004.

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