September 2018 Leading Economic Index Economic: Economic Growth Could Exceed 3.5% For 2H2018

The Conference Board Leading Economic Index (LEI) for the U.S improved this month – and the authors say “ the LEI’s growth has slowed somewhat in recent months, suggesting the economy may be facing capacity constraints and increasingly tight labor markets”.

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 Econoday) expected this index’s month-over-month change at 0.3 % to 0.5 % (consensus 0.5 %) versus the +0.5 % reported.

ECRI’s Weekly Leading Index (WLI) is forecasting much more moderate 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. increased 0.5 percent in September to 111.8 (2016 = 100), following a 0.4 percent increase in August, and a 0.7 percent increase in July.

“The US LEI improved further in September, suggesting the US business cycle remains on a strong growth trajectory heading into 2019. However, the LEI’s growth has slowed somewhat in recent months, suggesting the economy may be facing capacity constraints and increasingly tight labor markets,” said Ataman Ozyildirim, Director and Global Research Chair at The Conference Board. “Economic growth could exceed 3.5 percent in the second half of 2018, but, unless the momentum in housing, orders and stock prices accelerates, that pace is unlikely to be sustained in 2019.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.1 percent in September to 104.4 (2016 = 100), following a 0.3 percent increase in August, and a 0.1 percent increase in July.