December 2015 Leading Economic Index Declined

The Conference Board Leading Economic Index (LEI) for the U.S.declined this month – and the authors believe “the index continues to suggest moderate growth in the near-term despite the economy losing some momentum at the end of 2015″.

This index is designed to forecast the economy six months in advance. The market (from Bloomberg) expected this index’s value at -0.3 % to 0.2 % (consensus -0.1 %) versus the -0.2 % reported.

ECRI’s Weekly Leading Index (WLI) is forecasting very slow or possible negative 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 the U.S. declined 0.2 percent in December to 123.7 (2010 = 100), following a 0.5 percent increase in both November and October.

“The U.S. LEI fell slightly in December, led by a drop in housing permits and weak new orders in manufacturing,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “However, the index continues to suggest moderate growth in the near-term despite the economy losing some momentum at the end of 2015. While the LEI’s growth rate has been on the decline, it’s too early to interpret this as a substantial rise in the risk of recession.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.1 percent in December to 113.0 (2010 = 100), following a 0.1 percent increase in November, and a 0.2 percent increase in October.

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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.