The Latest Conference Board Leading Economic Index (LEI) for May is now available. The index rose 0.7 percent, which follows a 0.7 percent April increase. The latest indicator value came in above the 0.4 percent forecast by Investing.com.
Here is an overview from the LEI press release:
The Conference Board LEI for the US increased sharply in May, with building permits and the yield spread once again making large contributions. In the six-month period ending May 2015, the leading economic index increased 2.2 percent (about a 4.4 percent annual rate), slower than the growth of 3.4 percent (about a 7.0 percent annual rate) during the previous six months. However, the strengths among the leading indicators remain more widespread than the weaknesses. [Full notes in PDF]
Here is a chart of the LEI series with documented recessions as identified by the NBER.
For additional perspective on this indicator, see the latest press release, which includes this overview:
“The US LEI increased sharply again in May, confirming the outlook for more economic expansion in the second half of the year after what looks to be a much weaker first half,” said Ataman Ozyildirim, Director, Business Cycles and Growth Research, at The Conference Board. “While residential construction and consumer expectations support the more positive outlook, industrial production and new orders in manufacturing are painting a somewhat more mixed picture.”
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.
LEI and Its Six-Month Smoothed Rate of Change
Based on suggestions from Neile Wolfe of Wells Fargo Advisors, LLC and Dwaine Van Vuuren of RecessionAlert, we can tighten the recession lead times for this indicator by plotting a smoothed six-month rate of change to further enhance our use of the Conference Board's LEI as gauge of recession risk.
As we can see, the LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession. The latest reading of this smoothed rate-of-change suggests no near-term recession risk.
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