Summary: US leading index increases in line with expectations in December; improvements “broad-based”; Conference Board forecasts for March quarter “to exceed” 2% annualised.
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 signalled “a deep US recession”; more recent readings indicated the US recovery is still underway, albeit at a slowing pace.
The latest reading of the LEI indicates it rose by 0.3% in December. The result was in line with expectations but markedly less than November’s 0.7%. On an annual basis, the LEI growth rate increased from -2.4% to -1.8%.
“The US LEI’s slowing pace of increase in December suggests that US economic growth continues to moderate in the first quarter of 2021,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. He noted Improvements in the index “were very broad-based among the leading indicators, except for rising initial claims for unemployment insurance and a mixed consumer outlook on business and economic conditions,”
Changes over time can be large but once they are standardised, a clearer relationship with GDP emerges. The latest reading implies a zero year-on-year growth rate in March, up from the -0.3% implied for February after revisions. The Conference Board forecasts an annualised growth rate for the March quarter “to exceed 2.0%”, or about 0.5% over the quarter. A 0.5% increase in the March quarter would lead to a year-on-year rate of about 0.1%.
