Is the US on the Verge of Recession?
The Latest Conference Board Leading Economic Index (LEI) for November is now available. The index increased 0.4 percent to 124.6 from October's 124.1. The latest indicator value came in above the 0.1 percent forecast by Investing.com.
Here is an overview from the LEI press release:
The Conference Board Leading Economic Index® (LEI) for the US increased 0.4 percent in November to 124.6 (2010 = 100), following a 0.6 percent increase in October, and no change in September. [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 registered another increase in November, with building permits, the interest rate spread, and stock prices driving the improvement," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "Although the six-month growth rate of the LEI has moderated, the economic outlook for the final quarter of the year and into the new year remains positive."
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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