Summary: US leading index reading above expectations in March; economic momentum increasing in near term; Conference Board raises 2021 forecast.
The Conference Board Leading Economic Index (LEI) is a composite index composed of ten sub-indices which are thought to be sensitive to changes in the US economy. The Conference Board describes it as an index which attempts to signal growth peaks and troughs; turning points in the index have historically occurred prior to changes in aggregate economic activity. Readings from March and April of 2020 signalled “a deep US recession” but then subsequent readings indicated the US economy recovered rapidly.
The latest reading of the LEI indicates it rose by 1.3% in March. The result was double the 0.6% increase which had been generally expected and February’s 0.1% increase after it was revised. On an annual basis, the LEI growth rate increased from -1.3% after revisions to +8.1%.
“The improvement in the US LEI, with all ten components contributing positively, suggests economic momentum is increasing in the near term,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board.
Changes over time can be large but once they are standardised, a clearer relationship with GDP emerges. The latest reading implies a 4.1% year-on-year growth rate in June, up from May’s 0.2%. The Conference Board forecasts a 6.0% expansion across all of calendar 2021, up from their forecast of 5.5% a month ago.
Zero in the chart above represents the average US GDP growth rate from September 2002, or about 1.8% year on year.
US Treasury bond yields ended the day unchanged. At the close of business, 2-year, 10-year and 30-year Treasury yields finished at 0.15%, 1.56% and 2.26% respectively.