LPL – LEI’ding The Way To A Stronger Economy
The Conference Board’s Leading Economic Index (LEI) is one of our favorite economic indicators. It is designed to predict future movements in the economy based on a composite of 10 economic indicators (like manufacturers’ new orders, stock prices, and weekly unemployment claims) whose changes tend to precede shifts in the overall economy. Yesterday, it painted a continued strong backdrop for future economic growth, as it rose 0.5% month over month and 5.8% year over year.
Looking under the hood, the LEI has risen for 25 consecutive months, the longest such streak since one lasting 26 months ended in 2011. While the yield curve has been getting all the attention recently, every recession going back to the early 1970s first saw the LEI turn negative year over year; and because of its solid track record of predicting recessions, the LEI is a component of LPL Research’s Five Forecasters.
As our LPL Chart of the Day shows, the LEI is nowhere near turning negative.
“The fact that the LEI has been successful at forecasting recessions, and is one of the few forward-looking economic indicators, makes it one of our favorites. The strong recent data suggests a recession is nowhere in sight and signals solid underlying fundamentals in the U.S. economy,” said Ryan Detrick, LPL senior market strategist.
For more insights on our thoughts on the economy, be sure to read our recently released Midyear Outlook 2018: The Plot Thickens publication.