The Latest Conference Board Leading Economic Index (LEI) for April was released yesterday, but we failed to post usual our update. Here it is ... a day late. The index increased 0.6 percent to 123.9 from March's downwardly revised 123.1 (previously 123.4) and small downward revisions were made to January 123.2 to 123.0) and December (123.4 to 123.3). The latest indicator value came in above the 0.4 percent forecast by Investing.com.
Here is an overview from the LEI technical press release:
The Conference Board LEI for the U.S. increased in April, with all but consumer expectations making positive contributions. In the six-month period ending April 2016, the leading economic index increased 0.6 percent (about a 1.1 percent annual rate), slower than its growth of 1.3 percent (about a 2.6 percent annual rate) during the previous six months. However, the strengths among the leading indicators have become more widespread than the weaknesses. [Full notes in PDF]
Here is a chart of the LEI series with documented recessions as identified by the NBER.
For additional perspective on this indicator, see the latest press release, which includes this overview:
"The U.S. LEI picked up sharply in April, with all components except consumer expectations contributing to the rebound from an essentially flat first quarter,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “Despite a slow start in 2016, labor market and financial indicators, and housing permits all point to a moderate growth trend continuing in 2016."
For a better understanding of the relationship between the LEI and recessions, the next chart shows the percentage off the previous peak for the index and the number of months between the previous peak and official recessions.
LEI and Its Six-Month Smoothed Rate of Change
Based on suggestions from Neile Wolfe of Wells Fargo Advisors, LLC and Dwaine Van Vuuren of RecessionAlert, we can tighten the recession lead times for this indicator by plotting a smoothed six-month rate of change to further enhance our use of the Conference Board's LEI as gauge of recession risk.
As we can see, the LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession. The latest reading of this smoothed rate-of-change suggests no near-term recession risk. Here is a twelve month smoothed out version, which further eliminates the whipsaws:
