Conference Board Leading Economic Index Sees Fractional Increase in August
September 18, 2015
by Doug Short
The Latest Conference Board Leading Economic Index (LEI) for August is now available. The index increased 0.1 percent from a revised July 123.6 to today's 123.7. The latest indicator value came in below 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 slightly in August with large positive contributions from the yield spread and building permits more than offsetting the large negative contributions from initial unemployment claims and the ISM® new orders index. In the six-month period ending August 2015, the leading economic index increased 2.3 percent (about a 4.7 percent annual rate), an improvement from its growth of 2.0 percent (about a 4.1 percent annual rate) over the previous six months. 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 U.S. LEI suggests economic growth will remain moderate into the New Year, with little reason to expect growth to pick up substantially," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "Average working hours and new orders in manufacturing have been weak, pointing to more slow growth in the industrial sector. However, employment, personal income and manufacturing and trade sales have all been rising, helping to offset the weakness in industrial production in recent months."
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.