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Financial Sense Leading Economic Indicator Confirms Decelerating Growth Outlook

Mon, May 21, 2018 - 3:47pm

Our Financial Sense leading economic indicator (LEI) peaked in October 2017 and has experienced six months of consecutive declines. It is still in positive territory—meaning the risk of a recession over the next six months is quite low—but weakening, confirming the growth slowdown ECRI’s Lakshman Achuthan warned about earlier this year on FS Insider. (click any image to enlarge)

financial sense LEI
Source: Bloomberg, Financial Sense® Wealth Management

As to what it tracks, here’s what our Chief Investment Officer, Chris Puplava, had to say:

Our Financial Sense LEI measures four key, broad sectors of the US economy: manufacturing, services, housing, and employment. We created it to incorporate a wider range of leading indicators into a single metric that also provide more timely and economically-sensitive information on shorter timeframes.”

Here we show a chart comparing the widely watched Conference Board US Leading Index (in red) compared to our Financial Sense LEI (in blue). As you can see, the FS LEI tends to see wider swings and, at times, peak and trough prior to the Conference Board’s LEI.

financial sense LEI vs CB
Source: Bloomberg, Financial Sense® Wealth Management 

Bottom line: Leading economic indicators for the US economy are still in positive territory and suggest near-term risks of a recession are quite low. However, more economically-sensitive measures have peaked and indicate a deceleration in the pace of growth.

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