“This summer, before the financial market turmoil intensified, the overall economy was entering a period of decline," said Ken Goldstein, Labor Economist at The Conference Board. "The extreme volatility in the financial market, and the near freeze-up of credit, will no doubt weaken the economy further. But latest data suggest that conditions in the non-financial economy are not falling apart. Data on hand reflect a contracting economy, but not one in free fall. More likely, what’s going on in the financial market is a stretching of the recovery process -- which could take a full year to develop."

The Conference Board reports that the Coincident Index fell by 0.5 percent in September, following no change in August, and a 0.2 percent decrease in July. The Lagging Index fell by 0.2 percent in September, following a 0.2 percent rise in August. 

• The leading index increased in September, the first increase in the last five months. Real money supply, consumer expectations, the interest rate spread, and the index of supplier deliveries all made large positive contributions to the index in September, more than offsetting the negative contributions from building permits, stock prices, initial claims for unemployment insurance (inverted) and the average workweek in manufacturing. From March to September, the leading index decreased 1.3 percent (a -2.5 percent annual rate), declining modestly slower than the 1.7 percent decrease (a -3.4 percent annual rate) that prevailed in the previous six months. However, the weaknesses among the leading indicators have remained widespread over the past six months.
  
• The coincident index decreased sharply in September and it has declined or held steady since October 2007. Industrial production fell steeply this month, while employment continued to decline. The six-month decline in the coincident index has picked up to 0.8 percent (a –1.7 percent annual rate), from a decrease of 0.3 percent (a –0.6 percent annual rate) in the previous six months, while the weaknesses among the coincident indicators remained very widespread. In September, the coincident index decreased more than the lagging index, and the coincident-to-lagging ratio continued to decline as a result.
  
• With consistently widespread weakness among its components, the leading index has been falling since July 2007. Following the leading index, the coincident index, a monthly measure of current economic conditions, has also been decreasing, and its rate of decline has accelerated in recent months. Meanwhile, real GDP growth slowed to a 1.8 percent average annual rate in the first half of the year, down from an average annual rate of 2.3 percent in the second half of 2007. Taken together, the behavior of the composite indexes suggests that the economy is unlikely to improve in the near term.