July 2016 Leading Economic Index Improves Indicating Moderate Growth Ahead

The Conference Board Leading Economic Index (LEI) for the U.S improved this month - and the authors state "there may even be some moderate upside growth potential if recent improvements in manufacturing and construction are sustained, and average consumer expectations don't deteriorate further".

This index is designed to forecast the economy six months in advance. The market (from Bloomberg) expected this index's value at 0.1 % to 0.4 % (consensus 0.2 %) versus the +0.4 % reported.

ECRI's Weekly Leading Index (WLI) is forecasting slow growth over the next six months.

Additional comments from the economists at The Conference Board add context to the index's behavior.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.4 percent in July to 124.3 (2010 = 100), following a 0.3 percent increase in June, and a 0.2 percent decline in May.

"The U.S. LEI picked up again in July, suggesting moderate economic growth should continue through the end of 2016," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "There may even be some moderate upside growth potential if recent improvements in manufacturing and construction are sustained, and average consumer expectations don't deteriorate further."

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.4 percent in July to 113.9 (2010 = 100), following a 0.2 percent increase in June, and a 0.1 percent decline in May.

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LEI as an Economic Monitoring Tool:

The usefulness of the LEI is not in the headline graphics but by examining its trend behavior. Econintersect contributor Doug Short (Advisor Perspectives / dshort.com) produces two trend graphics. The first one shows the six month rolling average of the rate of change - shown against the NBER recessions. The LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession.

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