The Conference Board Leading Economic Index (LEI) for the U.S improved this month – and the authors say “The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year”.
Analyst Opinion of the Leading Economic Index
Because of the significant backward revisions, I do not trust this index.
This index is designed to forecast the economy six months in advance. The market (from Bloomberg) expected this index's value at 0.3 % to 1.0 % (consensus 0.6 %) versus the 1.2 % reported.
ECRI's Weekly Leading Index (WLI) is forecasting slower growth over the next six months.
Additional comments from the economists at The Conference Board add context to the index's behavior.
The Conference Board Leading Economic Index® (LEI)for theU.S. increased 1.2 percent in October to 130.4 (2010 = 100), following a 0.1 percent increase in September, and a 0.4 percent increase in August.
“The US LEI increased sharply in October, as the impact of the hurricanes dissipated,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year.”
The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.3 percent in October to 116.2 (2010 = 100), following a 0.1 percent increase in September, and no change in August.
z conference1.png
LEI as an Economic Monitoring Tool:
The usefulness of the LEI is not in the headline graphics but by examining its trend behavior. Econintersect contributor Doug Short (Advisor Perspectives / dshort.com) produces two trend graphics. The first one shows the six month rolling average of the rate of change – shown against the NBER recessions. The LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession.
