U.S. Leading Economic Index Drops in September, Down for 18 Straight Months
Summary
- LEI shows consecutive m/m decreases since April 2022.
- Coincident Economic Index up for the fifth time in six months.
- Lagging Economic Index up for the second successive month.
The U.S. Leading Economic Index (LEI) fell 0.7% m/m in September after drops of 0.5% in August (-0.4% initially) and 0.3% in July (unrevised), according to a report released today by The Conference Board. A 0.4% m/m September decline had been expected in the Action Economics Forecast Survey. The September LEI at 104.6 was the lowest level since June 2020 and down from its record high of 117.8 in December 2021. The year-on-year rate of decline was at -7.8% in September, more severe than -7.7% in August and -1.6% in September 2022.
Over the six-month period between March and September 2023, the LEI had fallen 3.4%, an improvement from its 4.6% drop over the prior six months (September 2022 to March 2023). The latest readings continue to signal weakening economic growth prospects and recession risks. However, the economy seems to be resilient despite pressures from high inflation and rising interest rates. Thus, The Conference Board stressed that “this trend will not be sustained for much longer, and a shallow recession is likely in the first half of 2024.”
Six of the LEI's ten indicators in September contributed negatively to the index change including average consumer expectations for business/economic conditions (-0.19ppt), the ISM new orders index (-0.14ppt), building permits for new private housing units (-0.14ppt), the spread between the 10-year Treasury note & the Fed funds rate (-0.12ppt), the leading credit index (-0.06ppt), and the S&P 500 index of stock prices (-0.05ppt). Meanwhile, initial claims for unemployment insurance (0.13ppt) and manufacturers’ new orders for consumer goods & materials (0.01ppt) contributed positively. Average weekly hours in manufacturing and manufacturers’ new orders for nondefense capital goods excluding aircraft orders were unchanged.
The Coincident Economic Index (CEI) rose 0.3% m/m (1.5% y/y) to 110.9 in September after increases of 0.1% in August (+0.2% initially) and 0.5% in July (+0.3% previously). All four of the CEI’s components made positive contributions to the September rise. They were payroll employment (0.07ppt), personal income less transfer payments (0.07ppt), industrial production (0.06ppt), and manufacturing & trade sales (0.03ppt).
The Lagging Economic Index (LAG) increased 0.2% m/m (1.3% y/y) to 118.5 in September following a 0.1% uptick in August (+0.2% initially) and a 0.1% easing in July (+0.1% previously). Four of the LAG's seven components made positive contributions to the index change including the change in the services CPI (0.12ppt), commercial & industrial loans outstanding (0.04ppt), the consumer installment credit-to-income ratio (0.04ppt), and the manufacturing & trade inventory-to-sales ratio (0.01ppt). Meanwhile, the average duration of unemployment (-0.15ppt) and the change in factory sector unit labor costs (-0.03ppt) contributed negatively. The average prime rate charged by banks was unchanged.
The ratio of the CEI to the LAG, also viewed as a leading indicator of recession, was at 93.6 in September after registering at 93.5 in August and July. The September reading, slightly higher than 93.4 in September 2022, was the highest since 94.0 in August 2022. While having begun to exhibit a slight uptrend, the ratio remained below its March 2021 high of 100.1.
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.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has 20+ years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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