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Conference Board Leading Economic Index Update

Conference Board Leading Economic Index: "Sustained Weak Growth Through the Fall"

By Doug Short

July 19, 2012

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The Conference Board Leading Economic Index (LEI) for June was released this morning. The index declined 0.3 percent to 95.6 (2004 = 100), following a 0.4 percent increase in May, and a 0.1 percent decline in April. The Briefing.com consensus had been for a 0.2 percent change.

Particularly striking was the subtitle to today's press release: "Indicators Point to Sustained Weak Growth Through the Fall".

Here is the overview of today's release from the LEI technical notes:

The Conference Board LEI for the U.S. declined for a second time this year in June. Weakness in new orders, consumer expectations and building permits contributed to this month's decline. In the six-month period ending June 2012, the leading economic index increased 1.0 percent (about a 1.9 percent annual rate), faster than the growth of 0.5 percent (about a 1.1 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators have become less widespread in recent months. [Full notes in PDF format]

Here a chart of the LEI series with documented recessions as identified by the NBER.

For a more details on the latest data, here is an excerpt from the press release:

Says Ataman Ozyildirim, economist at The Conference Board: "The U.S. LEI declined in two of the last six months, and its six-month growth rate has eased in the last three months. The strengths among the leading indicators have become less widespread as consumer expectations and manufacturing new orders offset gains in the financial, labor, and construction-related components. Meanwhile, the coincident economic index, a measure of current economic conditions, has risen slowly but steadily in the last three months."

Says Ken Goldstein, economist at The Conference Board: "The U.S. economy is growing very slowly. The CEI basically reflects this steady but soft pace of overall economic activity. The LEI is pointing to no strengthening over the next few months, as the economy continues to sail through strong headwinds domestically and internationally."

For a better understanding of the relationship between the LEI and recessions, the next chart shows the percentage off the previous peak for the index and the number of months between the previous peak and official recessions.

Here is a look at the rate of change, which gives a closer look at behavior of the index in relation to recessions.

And finally, here is the same snapshot, zoomed in to the data since 2000.

Check back next month for an updated analysis.

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