The latest Conference Board Leading Economic Index (LEI) for February was up 0.3% from the January final figure of 119.5.

The Conference Board LEI for the U.S. increased in February. Positive contributions from most of the index’s components more than offset negative contributions from three components: consumer expectations for business conditions, stock prices, and building permits. In the sixmonth period ending February 2022, the leading economic index grew 2.1 percent (about a 4.3 percent annual rate), down from 5.4 percent (about a 11.1 percent annual rate) over the previous six months. In addition, the strengths among the leading indicators have remained more widespread than weaknesses.

The Conference Board CEI for the U.S., a measure of current economic activity, also increased in February. The coincident economic index rose 1.5 percent (about a 3.0 percent annual rate) between August 2021 and February 2022, slower than the growth of 2.5 percent (about a 5.1 percent annual rate) over the previous six months. However, the strengths among the coincident indicators have remained very widespread, with all components advancing over the past six months. While CEI improved, the lagging economic index was unchanged. As a result, the coincident-to-lagging ratio increased. Real GDP expanded at a 7.0 percent annual rate in the fourth quarter of last year, after increasing 2.3 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, March 18, 2022…The Conference Board Leading Economic Index® (LEI) for the U.S. increased by 0.3 percent in February to 119.9 (2016 = 100), following a 0.5 percent decrease in January and a 0.8 percent increase in December.

“The US LEI rose slightly in February, partially reversing January’s decline,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “However, the latest results do not reflect the full impact of the Russian invasion of Ukraine, which could lower the trajectory for the US LEI and signal slower-thananticipated economic growth in the first half of the year. The global economic impact of the war on supply chains and soaring energy, food, and metals prices—coupled with rising interest rates, existing labor shortages, and high inflation—all pose headwinds to US economic growth. While the Omicron wave and its economic impact waned in recent months, the potential for new COVID-19 variants remains. Amid these risks, The Conference Board revised its growth projection for the US economy down to 3.0 percent year-over-year GDP growth in 2022— still well above the pre-pandemic growth rate, which averaged around 2 percent.”

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 perhaps has been a leading indicator of recessions. We count the lead time as the number of months that the ratio has been declining prior to a recession. There have been times where the ratio has been in decline for several months without a recession.