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The Conference Board Leading Economic Index™ (LEI) for the U.S. Improves Again

The Conference Board Leading Economic Index™ (LEI) for the U.S. increased 1.0 percent in September, following a 0.4 percent gain in August, and a 1.0 percent rise in July.

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“With the sixth consecutive increase, the LEI’s six-month growth rate has improved to its highest pace since 1983,” says Ataman Ozyildirim, Economist at The Conference Board. “Except for average workweek and building permits, all the leading indicators contributed positively to the index this month. At the same time, the contraction in the coincident economic index has halted in recent months, but the continued downtrend in employment is keeping this index of current economic conditions from rising faster.”

Says Ken Goldstein, Economist at The Conference Board: “The LEI has risen for six consecutive months and the coincident economic index has increased in two of the last three months. These numbers strongly suggest that a recovery is developing. However, the intensity of that recovery will depend on how much, and how soon, demand picks up.”

The Conference Board Coincident Economic Index™ (CEI) for the U.S. was unchanged in September, following a 0.1 percent increase in both August and July. The Conference Board Lagging Economic Index™ (LAG) declined 0.3 percent in September, following a 0.2 percent decline in August, and a 0.6 percent decline in July.

ABOUT THE CYCLICAL INDICATOR APPROACH.

The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading, coincident, and lagging economic indexes are essentially composite averages of several individual leading, coincident, or lagging indicators.  They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component—primarily because they smooth out some of the volatility of individual components.

Historically, the cyclical turning points in The Conference Board LEI for the U.S. have occurred before those in aggregate economic activity, while the cyclical turning points in The Conference Board CEI for the U.S. have occurred at about the same time as those in aggregate economic activity. The cyclical turning points in The Conference Board LAG for the U.S generally have occurred after those in aggregate economic activity.

U.S. Composite Economic Indexes: Components

Leading Economic Index Factor
1 Average weekly hours, manufacturing
2 Average weekly initial claims for unemployment insurance
3 Manufacturers’ new orders, consumer goods and materials
4 Index of supplier deliveries – vendor performance
5 Manufacturers’ new orders, nondefense capital goods
6 Building permits, new private housing units
7 Stock prices, 500 common stocks
8 Money supply, M2
9 Interest rate spread, 10-year Treasury bonds less federal funds
10 Index of consumer expectations

Coincident Economic Index

1 Employees on nonagricultural payrolls
2 Personal income less transfer payments
3 Industrial production
4 Manufacturing and trade sales

Lagging Economic Index
1 Average duration of unemployment
2 Inventories to sales ratio, manufacturing and trade
3 Labor cost per unit of output, manufacturing
4 Average prime rate
5 Commercial and industrial loans
6 Consumer installment credit to personal income ratio
7 Consumer price index for services

via The Conference Board Leading Economic Index™ (LEI) for the U.S. Improves Again.

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