Conference Board Leading Economic Index Increased Again in June
July 23, 2015
by Doug Short
The Latest Conference Board Leading Economic Index (LEI) for June is now available. The index rose 0.6 percent, which follows a 0.8 percent May increase. The latest indicator value came in above the 0.2 percent forecast by Investing.com.
Here is an overview from the LEI press release:
The Conference Board LEI for the U.S. increased again in June, with the yield spread and building permits continuing to make large positive contributions to the index. In the six-month period ending June 2015, the leading economic index increased 2.1 percent (about a 4.3 percent annual rate), slower than its growth of 3.2 percent (about a 6.6 percent annual rate) over the previous six months. However, the strengths among the leading indicators remain more widespread than the weaknesses. [Full notes in PDF]
Here is a chart of the LEI series with documented recessions as identified by the NBER.
For additional perspective on this indicator, see the latest press release, which includes this overview:
"The upward trend in the US LEI seems to be gaining more momentum with another large increase in June pointing to continued strength in the economic outlook for the remainder of the year,” said Ataman Ozyildirim, Director, Business Cycles and Growth Research, at The Conference Board. “Housing permits and the interest rate spread drove the latest gain in the LEI, while labor market indicators such as average workweek and initial claims remained unchanged."
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.
LEI and Its Six-Month Smoothed Rate of Change
Based on suggestions from Neile Wolfe of Wells Fargo Advisors, LLC and Dwaine Van Vuuren of RecessionAlert, we can tighten the recession lead times for this indicator by plotting a smoothed six-month rate of change to further enhance our use of the Conference Board's LEI as gauge of recession risk.
As we can see, the LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession. The latest reading of this smoothed rate-of-change suggests no near-term recession risk.