The latest Conference Board Leading Economic Index (LEI) for March was up 1.3% from the February final figure of 110.2.

The Conference Board LEI for the U.S. increased substantially in March, after being revised downward for February. The March gain was driven by positive contributions from all underlying components of the index. In the six-month period ending March 2021, the leading economic index increased 3.8 percent (about a 7.8 percent annual rate), slightly slower than the growth of 4.0 percent (about an 8.1 percent annual rate) over the previous six months. In addition, the strengths among the leading indicators have remained very widespread.

The Conference Board CEI for the U.S., a measure of current economic activity, also increased in March. The coincident economic index rose 1.7 percent (about a 3.4 percent annual rate) between September 2020 and March 2021, a reversal from the 2.8 percent decline (about a -5.4 percent annual rate) over the previous six months. The strengths among the coincident indicators have been more widespread than the weaknesses over the past six months. The lagging economic index registered two declines over the past three months while the CEI has been rising. As a result, the coincident-to-lagging ratio increased. Real GDP expanded at a 4.3 percent annual rate in the fourth quarter of 2020, after increasing 33.4 percent (annual rate) in the third quarter. More

Here is a log-scale chart of the LEI series with documented recessions as identified by the NBER. The use of a log scale gives us a better sense of the relative sizes of peaks and troughs than a more conventional linear scale.

For additional perspective on this indicator, see the latest press release, which includes this overview:

NEW YORK, April 22, 2021…The Conference Board Leading Economic Index® (LEI) for the U.S. increased 1.3 percent in March to 111.6 (2016 = 100), following a 0.1 percent decrease in February and a 0.5 percent increase in January.

“The U.S. LEI rose sharply in March, which more than offset February’s slightly negative revised figure,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The improvement in the U.S. LEI, with all ten components contributing positively, suggests economic momentum is increasing in the near term. The widespread gains among the leading indicators are supported by an accelerating vaccination campaign, gradual lifting of mobility restrictions, as well as current and expected fiscal stimulus. The recent trend in the U.S. LEI is consistent with the economy picking up in the coming months, and The Conference Board now projects year-over-year growth could reach 6.0 percent in 2021.”

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 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 a 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. Here is a twelve-month smoothed out version, which further eliminates the whipsaws:

The Conference Board also includes its Coincident Economic Index (CEI) in each release. It measures current economic activity and is made up of four components: nonagricultural payroll, personal income less transfer payments, manufacturing and trade sales, and industrial production. Based on observations, when the LEI begins to decline, the CEI is still rising. Here's a chart including both the CEI and LEI.

Here is a chart of the LEI/CEI ratio, which has also been a leading indicator of recessions.