Conference Board Leading Economic Index: Fourth Consecutive Monthly Increase

January 23, 2015

by Doug Short

The Latest Conference Board Leading Economic Index (LEI) for December is now available. The index rose 0.5 percent but November was revised to downward from 0.6 percent to 0.4 percent. The latest number came in above the 0.4 percent forecast by Investing.com. The latest release incorporates annual benchmark revisions and the base year was changed to 2010=100 (previously 2004=100).

Here is an overview from the LEI technical notes:

The Conference Board LEI for the U.S. increased for the fourth consecutive month in December. Positive contributions from the yield spread, the Leading Credit Index™ (inverted) and average weekly initial claims for unemployment insurance (inverted) more than offset the negative contribution from building permits. In the second half of 2014, the le ading economic index increased 3.3 percent (about a 6.8 percent annual rate), slightly faster than the growth of 3.0 percent (about a 6.1 percent annual rate) over the first half of 2014. In addition, the strengths among the leading indicators have remained widespread. [Full notes in PDF]

Here is a chart of the LEI series with documented recessions as identified by the NBER.

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And here is a closer look at this indicator since 2000. We can more readily see that the recovery from the 2000 trough weakened in 2012 but began trending higher in the latter part of the year.

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For a more details on the latest data, here is an excerpt from the press release:

"December’s gain in the LEI was driven by a majority of its components, suggesting the short-term outlook is getting brighter and the economy continues to build momentum," said Ataman Ozyildirim, Economist at The Conference Board. "Still, a lack of growth in residential construction and average weekly hours in manufacturing remains a concern. Current economic conditions measured by the coincident indicators show employment and income gains are helping to keep the U.S. economy on a solid expansionary path despite some weakness in industrial production."

For a better understanding of the relationship between the LEI and recessions, the next chart shows the percentage off the previous peak for the index and the number of months between the previous peak and official recessions.

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Here is a look at the rate of change, which gives a closer look at behavior of the index in relation to recessions.

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And finally, here is the same snapshot, zoomed in to the data since 2000.

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Check back next month for an updated analysis.

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