CB Leading Economic Index: Small Rise in November

The latest Conference Board Leading Economic Index (LEI) increased slightly in November. The index rose 0.3% from the previous month to 99.7 after eight consecutive monthly declines.

“The US LEI rose in November for the first time since February 2022,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “A rebound in building permits, continued support from equities, improvement in average hours worked in manufacturing, and fewer initial unemployment claims boosted the LEI in November. It’s worth noting that gains in building permits were not widespread geographically or by building type; they were concentrated mainly to the Northeast and Midwest, and on buildings with 5+ units rather than single-family dwellings. Overall, the rise in LEI is a positive sign for future economic activity in the US. The Conference Board currently forecasts US GDP to expand by 2.7% in 2024, but growth to slow to 2.0% in 2025.“ 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 17.6% 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 33 months off from the 2021 peak.

Leading Economic Index and Recessions