The Conference Board Leading Economic Index (LEI) for the U.S improved this month – and the authors say “labor market components made negative contributions in March and bear watching in the near future.”
Analyst Opinion of the Leading Economic Index
Because of the significant backward revisions, I do not trust this index.
This index is designed to forecast the economy six months in advance. The market (from Bloomberg) expected this index’s month-over-month change at 0.0 % to 0.3 % (consensus 0.2 %) versus the +0.3 % reported.
ECRI’s Weekly Leading Index (WLI) is forecasting slower growth over the next six months.
Additional comments from the economists at The Conference Board add context to the index’s behavior.
The Conference Board Leading Economic Index® (LEI)for theU.S. increased 0.3 percent in March to 109.0 (2016 = 100), following a 0.7 percent increase in February, and a 0.8 percent increase in January.
“The U.S. LEI increased in March, and while the monthly gain is slower than in previous months, its six-month growth rate increased further and points to continued solid growth in the U.S. economy for the rest of the year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The strengths among the components of the leading index have been very widespread over the last six months. However, labor market components made negative contributions in March and bear watching in the near future.”
The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.2 percent in March to 103.4 (2016 = 100), following a 0.4 percent increase in February, and a 0.1 percent decline in January.
LEI as an Economic Monitoring Tool:
The usefulness of the LEI is not in the headline graphics but by examining its trend behavior. Econintersect contributor Doug Short (Advisor Perspectives / dshort.com) produces two trend graphics. The first one shows the six month rolling average of the rate of change – shown against the NBER recessions. The LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession.