CB Leading Economic Index: Falls Again in May...But No Recession Signal

The latest Conference Board Leading Economic Index (LEI) decreased in May to its lowest level since April 2020. The index fell 0.5% from the previous month to 101.2. While the index does signal softer economic conditions lay ahead, the LEI is currently not signaling a recession.

“The U.S. LEI fell again in May, driven primarily by a decline in new orders, weak consumer sentiment about future business conditions, and lower building permits,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “While the Index’s six-month growth rate remained firmly negative, the LEI doesn’t currently signal a recession. We project real GDP growth will slow further to under 1 percent (annualized) over Q2 and Q3 2024, as elevated inflation and high interest rates continue to weigh on consumer spending.” More

Background on the Conference Board Leading Economic Index® (LEI)

The LEI is a composite index of several indicators. It is a predictive variable that anticipates, or leads, turning points in the business cycle and anticipates where the economy is heading. Since the LEI is comprised of multiple components, it is meant to provide a clearer picture as it is able to smooth out volatility associated with individual components. The ten components of Conference Board LEI include: Average weekly hours in manufacturing; Average weekly initial claims for unemployment insurance; Manufacturers’ new orders for consumer goods and materials; ISM® Index of New Orders; Manufacturers’ new orders for nondefense capital goods excluding aircraft orders; Building permits for new private housing units; S&P 500® Index of Stock Prices; Leading Credit Index; Interest rate spread (10-year Treasury bonds less federal funds rate); Average consumer expectations for business conditions.

Conference Board's Leading Economic Index Components

Here is a chart of the LEI series with documented recessions as identified by the NBER. Note the peaks of the index preceding each of the recessions and the troughs occurring near the end of each recession.

Conference Board's Leading Economic Index

Leading Economic Index and Recession Risk

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. We are currently 14.1% off the 2021 peak. The chart also calls out the number of months between the previous peak and official recessions. On average, there is usually 10.6 months between a peak and a recession. We are currently 29 months off from the 2021 peak.

Leading Economic Index and Recessions