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New Indicator: Leading Indexes for All 50 States
For release: 10 a.m.,
Contact: Katherine Dibling, senior media representative, (215) 574-4119
The new monthly indexes are a six-month forecast of the state coincident indexes. June’s leading indexes were released today.
About the Leading Indexes
- The Bank has produced leading indexes for the states in the Third Federal Reserve District — Delaware, New Jersey, and Pennsylvania — since April 2004.
- The leading index for each state predicts the six-month growth rate of the state’s coincident index.
- The models include the state’s related coincident index and variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the three-month Treasury bill.
- A time-series model (vector autoregression) is used to construct the leading index. Current and prior values of the forecast variables are used to determine the future values of the index.
Senior Economic Analyst Jason Novak:
“The leading indexes for all 50 states were a natural extension of the related coincident indexes that we have produced since April 2004. The coincident indexes have been useful to both public and private entities, and we hope that the leading indexes will also prove valuable.”
About June’s Release
- All but two state coincident indexes (Nevada and Montana) are projected to grow over the next six months.
- Five states (Alabama, Kentucky, Michigan, New Hampshire, and West Virginia) are projected to grow strongly (greater than 4.5 percent).
- For comparison purposes, the Philadelphia Fed has also developed a similar leading index for its U.S. coincident index, which is projected to grow 1.8 percent over the next six months.
The Federal Reserve Bank of Philadelphia helps formulate and implement monetary policy, supervises banks and bank holding companies, and provides financial services to depository institutions and the federal government. It is one of the 12 regional Reserve Banks that, together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Philadelphia Federal Reserve Bank serves eastern Pennsylvania, southern New Jersey, and Delaware.