Summary: Latest US leading index reading increases above expectations; improvements remain “broad-based”, solid March quarter implied; Conference Board forecasts 4.4% growth over 2021.
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 0.5% in January. The result was above the 0.3% increase which had been generally expected and more than December’s 0.4% after it was revised up from 0.3%. On an annual basis, the LEI growth rate increased from -1.5% after revisions to -1.4%.
“While the pace of increase in the U.S. LEI has slowed since mid-2020, January’s gains were broad-based and suggest economic growth should improve gradually over the first half of 2021,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. He expects the US labour market and GDP growth “to continue improving through the rest of this year as well.”
Changes over time can be large but once they are standardised, a clearer relationship with GDP emerges. The latest reading implies a 0.1% year-on-year growth rate in April, the same figure as in March after revisions. For this to take place, a 1.3% rise in the March quarter would be required. The Conference Board currently forecasts a 4.4% expansion across all of calendar 2021.