Conference Board Leading Economic Index Edged Up in February, Will Be Short-Lived

The latest Conference Board Leading Economic Index (LEI) for February was up 0.1% from the January figure of 112.0.

The Conference Board LEI for the U.S. increased slightly in February. Positive contributions from weekly manufacturing hours and average consumer expectations for business conditions offset declines in building permits and the ISM® New Orders Index. In the six-month period ending February 2020, the leading economic index increased 0.3 percent (about a 0.5 percent annual rate), slightly slower than the growth of 0.4 percent (about a 0.9 percent annual rate) over the previous six months. In February, the weaknesses and strengths among the leading indicators were balanced.

The Conference Board CEI for the U.S., a measure of current economic activity, increased in February. The coincident economic index rose 0.7 percent (about a 1.5 percent annual rate) between August 2019 and February 2020, about the same growth rate as over the previous six months. Also, the strengths among the coincident indicators have remained very widespread, with all components advancing over the past six months. The lagging economic index continued to increase at a slightly higher rate than the CEI. As a result, the coincident-to-lagging ratio is down slightly. Real GDP expanded at a 2.1 percent annual rate in both the third and fourth quarters of last year. [Full notes in PDF]

Here is a log-scale chart of the LEI series with documented recessions as identified by the NBER. The use of a log scale gives us a better sense of the relative sizes of peaks and troughs than a more conventional linear scale.

Conference Board's LEI

For additional perspective on this indicator, see the latest press release, which includes this overview:

“The U.S. LEI rose slightly in February, but it doesn’t reflect the impact of the COVID-19 pandemic which began to hit the U.S. economy in full by early March. The slight gain in February came only from half of the LEI components. In particular, the recovery in manufacturing, which looked promising until February, will now be short-lived because of the disruption in global supply chains and falling demand,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Declines in stock prices, consumers’ outlook on economic conditions, manufacturing new orders, average workweek in manufacturing, and rising unemployment claims will begin to negatively impact the economy. As a result, the economy may already be entering into a period of contraction.”

For a better understanding of the relationship between the LEI and recessions, the next chart shows the percentage-off the previous peak for the index and the number of months between the previous peak and official recessions.