Conference Board Leading Economic Index Remains in Growth Territory

March 20, 2015

by Doug Short

Note from dshort: I've appended a couple of rather striking charts at the bottom of this commentary in response to a suggestion from my friend Bob Bronson. What would the Conference Board's LEI look like if it were adjusted for population growth and inflation? Check it out.


The Latest Conference Board Leading Economic Index (LEI) for February is now available. The index rose 0.2 percent, which follows a 0.2 percent January increase and a 0.4% December increase. The latest number matched the forecast by Investing.com.

Here is an overview from the LEI technical notes:

The Conference Board LEI for the U.S. improved again in February, driven mostly by positive contributions from the financial components and building permits. In the six-month period ending February 2015, the leading economic index increased 2.4 percent (about a 5.0 percent annual rate), slower than the growth of 3.7 percent (about a 7.5 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators have remained widespread. [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 additional perspective on this indicator, see the latest press release, which includes this overview:

"Widespread gains among the leading indicators continue to point to short-term growth," said Ataman Ozyildirim, Economist at The Conference Board. "However, easing in the LEI’s six-month change suggests that we may be entering a period of more moderate expansion. With the February increase, the LEI remains in growth territory, but weakness in the industrial sector and business investment is holding economic growth back, despite improvements in labor markets and consumer confidence."

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.


What Would a Real Population-Adjusted LEI Look Like?

Here is an alternate perspective suggested by my friend Bob Bronson.

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