The Conference Board Leading Economic Index (LEI) for the U.S improved this month – and the authors say “that solid economic growth will continue into the first half of 2018“.

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 value at 0.0 % to 0.4 % (consensus 0.3 %) versus the +0.4 % 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 0.4 percent in November to 130.9 (2010 = 100), following a 1.2 percent increase in October, and a 0.1 percent increase in September.

“The U.S. LEI rose again in November, suggesting that solid economic growth will continue into the first half of 2018,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “In recent months, unemployment insurance claims have returned to pre-hurricane levels. In addition, improving financial indicators, new orders in manufacturing and historically high consumer sentiment have propelled the U.S. LEI even higher.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.3 percent in November to 116.5 (2010 = 100), following a 0.3 percent increase in October, and a 0.1 percent increase in September.

z conference1.png

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.