January 2016 Leading Economic Index Declined Again

The Conference Board Leading Economic Index (LEI) for the U.S.declined again this month – and the authors believe “ its six-month growth rate remains consistent with a modest economic expansion through early 2016.”.

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 -0.2 %) 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 January to 123.2 (2010 = 100), following a 0.3 percent decrease in December and a 0.5 percent increase in November.

“The U.S. LEI fell slightly in January, driven primarily by large declines in stock prices and further weakness in initial claims for unemployment insurance,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “Despite back-to-back monthly declines, the index doesn’t signal a significant increase in the risk of recession, and its six-month growth rate remains consistent with a modest economic expansion through early 2016.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.3 percent in January to 113.2 (2010 = 100), following a 0.1 percent increase in December, and no change in November

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.