CB LEI: Rising Trajectory Continues in December

The latest Conference Board Leading Economic Index (LEI) for December was up 0.8% from the November final figure of 119.9. Annual revisions were made.

The Conference Board LEI for the U.S. increased again in December. Eight of the index’s ten components contributed positively; the only negative contributor was consumers’ outlook for business conditions, while average weekly manufacturing hours was unchanged. In the second half of 2021, the leading economic index increased 4.0 percent (about an 8.1 percent annual rate), down somewhat from the growth of 4.4 percent (about a 9.0 percent annual rate) over the first half of 2021. However, the strengths among the leading indicators continued to be widespread.

The Conference Board CEI for the U.S., a measure of current economic activity, also increased in December. The coincident economic index rose 1.3 percent (about a 2.7 percent annual rate) between June and December 2021, slower than the growth of 1.8 percent (about a 3.7 percent annual rate) over the previous six months. Nevertheless, the strengths among the coincident indicators have remained very widespread, with all components advancing over the past six months. The lagging economic index continued to increase, but at a slower pace than the CEI. As a result, the coincident-to-lagging ratio edged up. 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:

“The U.S. LEI ended 2021 on a rising trajectory, suggesting the economy will continue to expand well into the spring,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board.

“For the first quarter, headwinds from the Omicron variant, labor shortages, and inflationary pressures—as well as the Federal Reserve’s expected interest rate hikes—may moderate economic growth. The Conference Board forecasts GDP growth for Q1 2022 to slow to a relatively healthy 2.2 percent (annualized). Still, for all of 2022, we forecast the US economy will expand by a robust 3.5 percent—well above the pre-pandemic trend 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.