Conference Board Leading Economic Index Remains in Growth Territory

April 17, 2015

by Doug Short

The Latest Conference Board Leading Economic Index (LEI) for March is now available. The index rose 0.2 percent, which follows a 0.1 percent February increase (a downward revision from 0.2 percent). The latest number came in below the 0.3 percent forecast by

Here is an overview from the LEI technical notes:

The Conference Board LEI for the U.S. increased again in March. Large positive contributions from initial unemployment claims and the yield spread more than offset the large negative contribution from building permits. In the six-month period ending March 2015, the leading economic index increased 1.8 percent (about a 3.7 percent annual rate), much slower than the growth of 3.3 percent (about a 6.7 percent annual rate) during the previous six months. But the strengths among the leading indicators have remained 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.

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For additional perspective on this indicator, see the latest press release, which includes this overview:

"Although the leading economic index still points to a moderate expansion in economic activity, its slowing growth rate over recent months suggests weaker growth may be ahead,” said Ataman Ozyildirim, Economist at The Conference Board. “Building permits was the weakest component this month, but average working hours and manufacturing new orders have also slowed the LEI’s growth over the last six 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.

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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.

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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.

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