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 peaks and troughs, as turning points in the index have historically occurred prior to changes in aggregate economic activity. While readings from the first two months of 2020 appeared to have represented a break from the downtrend of the second half of 2019, the latest report confirms those numbers to be merely aberrations.
The LEI dropped by 6.7% in March, slightly above the 7.0% fall which had been expected but a massive change from February’s -0.2% after the previous month’s figure was revised down from +0.1%. On an annual basis, the LEI slowed from February’s revised growth rate of 0.2% to -6.8% in March.
“The sharp drop in the LEI reflects the sudden halting in business activity as a result of the global pandemic and suggests the US economy will be facing a very deep contraction,” 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 year-on-year growth rate of -0.75% at the end of the September 2020 quarter.
US Treasury bond yields at the short end finished a little lower while yields further out along the curve increased. By the end of the day, the 2-year Treasury bond yield had lost 2bps to 0.19%, the 10-year yield had gained 2bps to 0.64% while the 30-year yield finished 5bps higher at 1.27%.