Conference Board Leading Economic Index (LEI)

The Conference Board Leading Economic Index, or "LEI," signals potential turning points in the U.S. economy and provides an overall forecast of near-term economic performance. The LEI is one of three indices released simultaneously:

• The Conference Board Leading Economic Index
• The Conference Board Coincident Economic Index
• The Conference Board Lagging Economic Index

All three indices are composites of existing economic indicators, but the LEI is the most closely monitored.

The Conference Board Leading Economic Index predicts turning points in the business cycle approximately seven months in advance. It consists of ten sub-indices that typically lead the overall economy.

The ten sub-indices are:

1. Average weekly hours in manufacturing: This measures the average hours worked by manufacturing employees. Companies often adjust worker hours in response to demand before making hiring or firing decisions, making this a leading economic indicator.
2. Average weekly initial unemployment insurance claims: An increase in initial claims indicates more people are unemployed, leading to reduced consumer spending and a weaker economy, all else being equal.
3. Manufacturers’ new orders for consumer goods and materials: An uptick in new orders suggests rising demand, while a decline indicates the opposite.
4. Speed of delivery of new merchandise to vendors from suppliers: This serves as a leading indicator because increased demand can result in longer delivery times as suppliers struggle to meet orders.
5. Manufacturers’ new orders for nondefense capital goods excluding aircraft: New orders for capital goods unrelated to defense can signal rising demand, thus leading the business cycle.
6. Building permits for new private housing units: The number of new residential building permits typically rises in anticipation of demand, making it a leading economic indicator.
7. The S&P 500 stock index: This index reflects the stock prices of the 500 largest U.S. companies. Changes in this index are seen as a leading indicator of future economic activity.
8. The inflation-adjusted monetary supply (M2): This measure of bank lending tends to increase before economic expansion and decrease before contraction, making it a leading economic indicator.
9. Interest rate spread (10-year Treasury bonds less federal funds rate): The difference between long and short-term interest rates serves as a leading economic indicator. A narrowing spread often suggests anticipated interest rate cuts by the Federal Reserve, typically during economic slowdowns.
10. Average consumer expectations for business conditions: This index gauges consumer optimism about the economy. When consumers feel pessimistic, they tend to reduce spending, leading to economic slowdowns, and vice versa.

The market's focus on this indicator upon its release varies based on current market conditions. Therefore, the best way to integrate this indicator into your analysis and trading is to monitor it in real-time.

When is it released? The Conference Board Leading Economic Index® is published monthly at 10:00 am ET.