Conference Board Leading Economic Index Increased Again in October

November 20, 2014

by Doug Short

The Latest Conference Board Leading Economic Index (LEI) for October is now available. The index rose 0.9 percent to 105.5. September was revised downward to 104.3 percent (2004 = 100). The latest number came in above the 0.6 percent forecast by Investing.com.

Here is an overview from the LEI technical notes:

The Conference Board LEI for the U.S. increased sharply in October. This month’s gain was driven by large positive contributions from the yield spread, the ISM® new orders index and weekly initial claims for unemployment insurance (inverted). In the six-month period ending October 2014, the leading economic index increased 4.0 percent (about an 8.1 percent annual rate), faster than the growth of 2.7 percent (about a 5.6 percent annual rate) over the previous six months. In addition, the strengths among its components have become very widespread in recent months. [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:

“The LEI rose sharply in October, with all components gaining over the previous six months,” said Ataman Ozyildirim, Economist at The Conference Board. “Despite a negative contribution from stock prices in October, and minimal contributions from new orders for consumer goods and average workweek in manufacturing, the LEI suggests the U.S. expansion continues to be strong.”

“The upward trend in the LEI points to continued economic growth through the holiday season and into early 2015,” said Ken Goldstein, Economist at The Conference Board. “This is consistent with our outlook for relatively good, but not great, consumer demand over the near term. Going forward, there are continued concerns about slow business investment and lackluster income growth.”

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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