U.S. Index of Leading Indicators Fell Again in July
by:Sandy Batten
|in:Economy in Brief
Summary
- Leading index declined for the 16th consecutive month, pointing to economic contraction ahead.
- Coincident Economic Index rose for third time in past four months.
- Lagging Economic Index unchanged for fourth time in past five months.
The U.S. Leading Economic Index (LEI) fell 0.4% m/m in July after an unrevised 0.7% m/m decline in June, according to a report released today by The Conference Board. A 0.4% m/m decline in July had been expected by the Action Economics Forecast Survey. The July LEI at 105.8 was the lowest level since June 2020. This was the sixteenth consecutive monthly decline for the index. However, the monthly decline in July was the smallest since August 2022. In its more than 60-year history, during which it has been a very accurate indicator of economic downturns, it has never declined for 16 consecutive months without the economy subsequently entering a recession.
Over the six-month period between January and July 2023, the LEI fell 4.0%, a larger decline than its 3.7% drop over the prior six months (July 2022-January 2023). The year-on-year rate of decline narrowed slightly to -7.5% in July from -7.7% in June, off its recent low of -8.0% reached in April.
Five of the LEI’s ten indicators made negative contributions to the overall index in July, led by ISM new orders (-0.18ppt), the inverted yield curve (-0.15ppt) and consumer expectations for the economy (-0.12ppt). Three of the index’s components made positive contributions with a 0.15ppt contribution from the S&P 500 stock price index and a 0.14ppt add from lower unemployment insurance claims. The remaining two of the index’s components were unchanged in July.
The Coincident Economic Index (CEI) increased 0.4% m/m (+1.7% y/y) in July, its largest monthly gain since January, after having been unchanged in June. All four of the four CEI’s components made positive contributions in July, led by a 0.19ppt addition from industrial production, following two consecutive monthly subtractions, and a 0.07ppt contribution from personal income less transfer payments.
The Lagging Economic Index (LAG) was unchanged in July (+2.6% y/y), as it was in June. This index has been unchanged in four of the past five months. Four of the index’s seven components made positive contributions in July, while three made negative contributions, led by a 0.15ppt drag from the rise in the services CPI.
The ratio of the coincident index to the lagging index is also viewed as a leading indicator. This measure rose 0.3% m/m in July, its second monthly increase in the past three months. It has recently begun to exhibit a slight uptrend, in contrast with the LEI, with the most recent reading on its level (93.4) the highest since September 2022.
The Conference Board figures are available in Haver's BCI database; the components are available there, and most are also in USECON. The expectations are in the AS1REPNA database. Visit the Conference Board's website for coverage of leading indicator series from around the world.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
More Economy in Brief
Global
