March 2021 Leading Economic Index Rose Sharply

LEI as an Economic Monitoring Tool:

The methodology for this index was "improved" in December 2011.

As a comparison to the LEI, ECRI's WLI (which Econintersect reports on each week) is now in expansion showing strengthening growth.

Current ECRI WLI Index

Econintersect believes the USA economy is expanding at the Main Street level. (analysis here).

Caveats on the Use of the Leading Economic Index (LEI)

This index is produced by The Conference Board (a private money-making company) - who charges for the details of the indices they publish - although the summary of this index is available to the public. It's designed to predict economic growth over the next six months.

This is not a "black box" economic forecasting index as The Conference Board publishes the components. It was completely revised with the release of December 2011 (analysis comparing the old and new index components - click here). The new components of the index and multipliers:

The index does not adjust for inflation or population growth, is not final for several months after being published, and is subject to annual revision. The methodology in producing this index:

1) normalized levels of the indicator rather than its monthly changes will be used to calculate the component contributions of components based on diffusion indexes such as the ISM New Orders Index; 2) when component data are missing, autoregressions in log differences instead of levels will be used to calculate the statistical imputation of the missing months; 3) trend adjustment will be done in two periods: 1959-1983 and 1984-2010 (same as the volatility adjustment); and 4) LCI contributions to the LEI are calculated from its levels (not monthly changes) and it is inverted As a result of these changes, the history of the revised indexes and their month-over-month changes will no longer be directly comparable to those issued prior to the comprehensive benchmark revision. Based on its performance since 1990, and especially before and during the 2008-2009 recession, the new LEI should provide more accurate predictions of business cycle peaks and troughs.

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