The Conference Board Leading Economic Index

The Conference Board released its latest monthly update to its “Leading Economic Index” on October 18.  The Index is a composite of many different data points in the U.S. economy, providing a window into the pace of growth in the U.S. economy.  Happily, the latest report that covers the month of September was positive once again, increasing by 0.5%.  The Index now stands at 111.8, which is a new high. Says the Conference Board: “The US LEI improved further in September, suggesting the US business cycle remains on a strong growth trajectory heading into 2019. However, the LEI’s growth has slowed somewhat in recent months, suggesting the economy may be facing capacity constraints and increasingly tight labor markets…Economic growth could exceed 3.5 percent in the second half of 2018, but, unless the momentum in housing, orders and stock prices accelerates, that pace is unlikely to be sustained in 2019.” The report tells us that the U.S. economy is still quite strong.  The factors that comprise the index include:

  • Average weekly hours, manufacturing
  • Average weekly initial claims for unemployment insurance
  • Manufacturers’ new orders, consumer goods and materials
  • ISM® Index of New Orders
  • Manufacturers' new orders, nondefense capital goods excluding aircraft orders
  • Building permits, new private housing units
  • Stock prices, 500 common stocks
  • Leading Credit Index™ Interest rate spread, 10-year Treasury bonds less federal funds
  • Average consumer expectations for business conditions
Because many of the data points here are forward-looking, the Leading Economic Index is an important tool for forecasting what is to come in the next year.  Though growth may be slowing, we still see a robust picture for the U.S. economy heading into 2019.  In advance of any true correction in the stock and bond markets, we would expect that this Index would begin to go down.  So far, we are not yet observing the conditions that would mark an end to this economic cycle, and a beginning of a bear market for stocks. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth may not develop as predicted.