Conference Board Leading Economic Index: Sixth Monthly Increase

August 21, 2014

by Doug Short

The Latest Conference Board Leading Economic Index (LEI) for July is now available. The index rose 0.9 percent to percent to 103.3. June was revised upward 102.4 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 for the sixth consecutive month in July. Large positive contributions from the yield spread, building permits, initial claims for unemployment insurance, and the ISM® new orders index fueled this month’s gain. In the six-month period ending July 2014, the leading economic index increased 4.0 percent (about an 8.2 percent annual rate), faster than the growth of 2.9 percent (about a 5.9 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators became 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 improved sharply in July, suggesting that the economy is gaining traction and growth should continue at a strong pace for the remainder of the year,” said Ataman Ozyildirim, Economist at The Conference Board. “Although housing has been one of the weakest components this year, the sharp gain in building permits helped boost the LEI in July. Financial markets and labor market conditions have also supported recent gains, but business spending indicators remain soft and their contribution marginal.”

“The pace of economic activity remained reasonably strong in July,” said Ken Goldstein, Economist at The Conference Board. “Although retail sales were a little disappointing, hiring and industrial activity improved. July’s increase in the LEI, coupled with its accelerating growth trend, points to stronger economic growth over the coming 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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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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