The March 2024 US Leading Economic Index (LEI) report is available.
Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board said, “February’s uptick in the U.S. LEI proved to be ephemeral as the Index posted a decline in March. Negative contributions from the yield spread, new building permits, consumers’ outlook on business conditions, new orders, and initial unemployment insurance claims drove March’s decline. The LEI’s six-month and annual growth rates remain negative, but the pace of contraction has slowed. Overall, the Index points to a fragile—even if not recessionary—outlook for the U.S. economy. Indeed, rising consumer debt, elevated interest rates, and persistent inflation pressures continue to pose risks to economic activity in 2024. The Conference Board forecasts GDP growth to cool after the rapid expansion in the second half of 2023. As consumer spending slows, US GDP growth is expected to moderate over Q2 and Q3 of this year.”
Explaining the LEI (this is for academic purposes; it isn’t investment advice): The LEI is a predictor (indicator) of future US economic activity (source: A Guide to Everyday Economic Statistics, Clayton, Giesbrecht, and Guo, 2010). It is one of the most heavily watched indicators of future economic activity. The LEI has historically predicted most recessions with a sharp drop. Predictive indicators are, by their nature, imperfect, and thus, the LEI may fail to anticipate or falsely predict future economic activity. For example, the LEI predicted a recession in 1984, but massive federal deficit spending appears to have provided enough stimulus to avert a recession.