Conference Board Leading Economic Index Remains in Recession Territory

The latest Conference Board Leading Economic Index (LEI) for August was up 1.2% from the July final figure of 105.2. predicted a 1.3% increase.

Here's an excerpt from the technical notes.

The Conference Board LEI for the U.S. increased for the fourth consecutive month in August. Positive contributions from average weekly initial claims for unemployment insurance (inverted), the ISM® New Orders Index, and stock prices more than offset negative contributions from consumer expectations for business conditions, manufacturers’ new orders, the Leading Credit Index™ (inverted), and building permits. In the six-month period ending August 2020, the leading economic index decreased 4.7 percent (about a -9.3 percent annual rate), compared to no growth over the previous six months. In addition, the weaknesses among the leading indicators remain widespread

The Conference Board CEI for the U.S., a measure of current economic activity, increased in August. However, the coincident economic index decreased by 6.4 percent (about a -12.4 percent annual rate) between February and August 2020, a reversal from the growth of 0.8 percent (about a 1.7 percent annual rate) over the previous six months. In addition, the weaknesses among the coincident indicators remain very widespread, with all components declining over the past six months. The lagging economic index continued to decline while the CEI continued to improve. As a result, the coincident-to-lagging ratio has increased. Real GDP contracted at a 31.7 percent annual rate in the second quarter, after declining 5.0 percent annual rate in the first quarter

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:

NEW YORK, September 18, 2020…The Conference Board Leading Economic Index® (LEI) for the U.S. increased 1.2 percent in August to 106.5 (2016 = 100), following a 2.0 percent increase in July and a 3.1 percent increase in June.

“While the US LEI increased again in August, the slowing pace of improvement suggests that this summer’s economic rebound may be losing steam heading into the final stretch of 2020,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Despite the improvement, the LEI remains in recession territory, still 4.7 percent below its February level. Weakening in new orders or capital goods, residential construction, consumers’ outlook, and financial conditions point to increasing downside risks to the economic recovery. Looking ahead to 2021, the LEI suggests that the US economy will start the new year under substantially weakened economic conditions.”

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.