April 2018 Leading Economic Index Points To Moderated Growth

The Conference Board Leading Economic Index (LEI) for the U.S improved this month - and the authors say "the LEI's six-month growth rate has recently moderated somewhat, suggesting growth is unlikely to strongly accelerate".

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 month-over-month change at -0.1 % to 0.4 % (consensus 0.3 %) versus the +0.4 % reported.

ECRI's Weekly Leading Index (WLI) is forecasting 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 0.4 percent in April to 109.4 (2016 = 100), following a 0.4 percent increase in March, and a 0.7 percent increase in February.

"April's increase and continued uptrend in the U.S. LEI suggest solid growth should continue in the second half of 2018. However, the LEI's six-month growth rate has recently moderated somewhat, suggesting growth is unlikely to strongly accelerate," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "In April, stock prices and housing permits were the only negative contributors, whereas the labor market components, which made negative contributions in March, improved."

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.3 percent in April to 103.5 (2016 = 100), following a 0.2 percent increase in March, and a 0.2 percent increase in February.

(Click on image to enlarge)

 

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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.

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