After months of no positive movement, 11 out of AIER's 12 primary leading indicators have posted increases in the most recent batch of data. However, the big picture does not yet point to a definite change in the business cycle. For most of the series, the upturn has lasted for only a month or two, and the statistical probabilities do not yet point to long-term changes.

After decreasing or remaining flat since the beginning of the year, the percentage of leaders expanding , which is shown on the first chart below, increased from 18 last month to 30 this month (three out of ten series with a discernible trend). The cyclical score of leaders, which is based on a separate purely mathematical analysis, has increased from 33  to 38. This is shown on the second chart below. A value below 50 for each of these measures indicates that contraction is more likely than a recovery.

We upgraded the cyclical status of four of the leaders: the index of manufacturers' prices, vendor performance, the index of common stock prices, and initial claims for state unemployment insurance. These series hint at some improvements in the manufacturing sector and possibly a return of investor optimism.

Consumers, however, are still facing difficulties. Consumer debt shrunk in May for the eighth consecutive month, the longest continuous period of decline on record. Consumers, overextended on their credit cards and other loans, seem to be cutting back on borrowing and reducing their debt. (Another related indicator, new orders for consumer goods, is the only one of the 12 leaders that did not post an increase in base data, further suggesting that consumers are cutting back on spending.)

None of the primary roughly coincident indicators or primary lagging indicators increased in recent months. (There has been no new data since March for the change in labor cost per unit of output in manufacturing, the only series still appraised as expanding.) All other series remain appraised as contracting, definitively confirming that the economy is in recession.

Read a general description of our indicators and methods of analysis.

• Receive a detailed monthly analysis of business conditions, plus articles and books on a wide range of economic issues. Learn more about the benefits of Membership.