Summary: US leading index up 0.7% in June, below expectations; “strong economic growth will continue in near term”; Conference Board 2021 forecast unchanged at 6.6%.
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” while subsequent readings indicated the US economy had recovered rapidly.
The latest reading of the LEI indicates it rose by 0.7% in June. The result was below the 0.9% increase which had been generally expected and lower than May’s revised figure of 1.2%. On an annual basis, the LEI growth rate slowed from 14.8% after revisions to 12.1%.
Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board, described the increase as “broad-based” across the ten components of the index despite declines in two of them. He expects “strong economic growth will continue in the near term.”
Changes over time can be large but once they are standardised, a clearer relationship with GDP emerges. The latest reading implies a 5.8% year-on-year growth rate in September, down from August’s 6.8%. The Conference Board forecasts a 6.6% expansion across all of calendar 2021, unchanged from their forecast of 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 modestly lower. At the close of business, the 2-year Treasury yield remained unchanged at 0.21%, the 10-year yield had slipped 1bp to 1.28% while the 30-year yield finished 2bps lower at 1.92%.