NEW YORK (MNI) – The following was issued by the Conference Board
Thursday morning:

Changes to The Conference Board Leading Economic Index for the
U.S. Aim for More Accurate Business Cycle Predictor

The Conference Board, the global research and business membership
organization, today announced several changes to The Conference Board
Leading Economic Index (LEI) for the United States. The changes, which
will take effect beginning with the January 26, 2012 release, represent
comprehensive benchmark revisions to the U.S. LEI. They are the first
major overhaul of the components of the LEI since 1996, when The
Conference Board assumed responsibility for the business cycle
indicators program from the Bureau of Economic Analysis at the U.S.
Department of Commerce.

The revisions are the result of an extensive reevaluation of the
existing LEI components and were made following discussions with The
Conference Board Business Cycle Indicators Advisory Panel and other
experts in the field. The changes respond to structural changes in the
U.S. economy:

–The former Real Money Supply (M2) component will be removed,
retroactive to 1990, and replaced by a new Leading Credit Index (LCI)
component.

–The Institute of Supply Management (ISM) Supplier Delivery Index
will be replaced as a component by the ISM New Orders Index.

–The Reuters/University of Michigan Consumer Expectations Index
will be replaced by an equally weighted average of consumer expectations
measures that come from surveys conducted by The Conference Board and
Reuters/University of Michigan.

–The “New Orders for (nondefense) Capital Goods” component will be
replaced by “New Orders for (nondefense) Capital Goods, excluding
Aircraft.”

In addition to these changes, several technical adjustments will be
made to ensure a more rigorous reading of data and trends. All of these
extensive changes are being introduced together to minimize disruption
to users of the LEI data.

“These adjustments have been designed to make the U.S. Leading
Economic Index an even stronger predictor of peaks and troughs in the
business cycle, while recognizing changes in the functioning and drivers
of the economy in the short and medium term,” said Bart van Ark, Chief
Economist at The Conference Board. “Our research has demonstrated that
our new Leading Credit Index better reflects changes in business
conditions than the old real money supply component, due to basic
structural changes in the U.S. economy since the 1980s.”

The LCI was developed by The Conference Board as a proprietary
composite measure of a number of financial-market indicators that have
proven their worth over the past two decades as forward-looking
predictors of economic activity. Among the data aggregated in the LCI
are measures of yield curves, as well as newer indicators on interest
rate swaps, and the Federal Reserve’s senior loan officer survey.

“Though we’ve built on a large body of established literature, the
Leading Credit Index differs from many other indexes on financial
conditions currently available,” noted Ataman Ozyildirim, Director of
Economic Research at The Conference Board. “Its components form a
carefully selected set of indicators which zero in on business-cycle
turning points, rather than general financial stress or instability. Our
revised figures have shown that the Leading Credit Index, in conjunction
with other changes, make the new LEI a more accurate predictor of the
U.S. business cycle since 1990, especially before and during the
2008-2009 recession, and during the new recovery/expansion period we are
currently in.”

After this extensive readjustment, future U.S. LEI levels, and
their month-over-month movements, will no longer be directly comparable
to the figures released before the change. The new revised historical
series, dating back to 1990, will be available at the time of the U.S.
LEI report, which will be issued on January 26. More information is
available at http://www.conference-board.org/data/bci.cfm or
indicators@conference-board.org.

** Market News International Washington Bureau: 202-371-2121 **

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