CB Leading Economic Index: Sharp Rise in October

The latest Conference Board Leading Economic Index (LEI) for October was up 0.9% from the September final figure of 117.3.

The Conference Board LEI for the U.S. rose substantially in October, with positive contributions from all components except for consumer’s outlook on business and economic conditions and weekly manufacturing hours. In the six-month period ending October 2021, the leading economic index increased 4.6 percent (about a 9.4 percent annual rate), up very slightly from 4.5 percent (about an 9.3 percent annual rate) over the previous six months. However, the strengths among the leading indicators have become nearly balanced with its weaknesses.

The Conference Board CEI for the U.S., a measure of current economic activity, also improved in October. The coincident economic index rose 1.7 percent (about a 3.5 percent annual rate) between April and October 2021, up slightly from 1.5 percent (about a 2.9 percent annual rate) over the previous six months. The strengths among the coincident indicators have remained widespread. The lagging economic index continued to rise, but at a slower rate than the CEI. As a result, the coincident-to-lagging ratio increased. Real GDP expanded at a 2.0 percent annual rate in the third quarter of the year, after increasing 6.7 percent (annual rate) in the previous quarter. More

Here is a log-scale chart of the LEI series with documented recessions as identified by the NBER. The use of a log scale gives us a better sense of the relative sizes of peaks and troughs than a more conventional linear scale.

Conference Board's LEI

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

NEW YORK, November 18, 2021…The Conference Board Leading Economic Index® (LEI) for the U.S. increased by 0.9 percent in October to 118.3 (2016 = 100), following a 0.1 percent increase in September and a 0.7 percent increase in August.

“The U.S. LEI rose sharply in October suggesting the current economic expansion will continue into 2022 and may even gain some momentum in the final months of this year,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Gains were widespread among the leading indicators, with only the average workweek and consumers’ outlook making negative contributions.

“However, rising prices and supply chain bottlenecks pose challenges to growth and are not expected to dissipate until well into 2022. Despite these headwinds, The Conference Board forecasts growth to remain strong in the fourth quarter at around 5.0 percent (annualized rate), before moderating to a still historically robust rate of 2.6 percent in Q1 2022.”

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.