The Conference Board Leading Economic Index (LEI) for the U.S again improved this month – and the authors state there will be “continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year”.

Analyst Opinion of the Leading Economic Index

The rate of growth may be improving on this 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 value at 0.2 % to 0.5 % (consensus 0.4 %) versus the +0.6 % 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 0.6 percent in June to 127.8 (2010 = 100), following a 0.2 percent increase in May, and a 0.2 percent increase in April.

“The U.S. LEI rose sharply in June, pointing to continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The broad-based gain in the U.S. LEI was led by a large contribution from housing permits, which improved after several months of weakness.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.2 percent in June to 115.5 (2010 = 100), following a 0.3 percent increase in May, and a 0.2 percent increase in April.

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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.