Conference Board Leading Economic Index (LEI)

The Conference Board Leading Economic Index (LEI) is a composite index that is designed to provide insights into the future direction of the economy. It is a widely followed economic indicator that helps forecast changes in economic activity and identify turning points in the business cycle.

The LEI is calculated using a combination of economic data and indicators that have proven to be reliable predictors of future economic activity. These indicators include variables such as average weekly hours worked in manufacturing, building permits, stock prices, consumer expectations, and new orders for capital goods.

The LEI is constructed through a rigorous statistical methodology that assigns weights to each component based on its relative importance in predicting economic trends. The weights are determined through a dynamic factor model, which takes into account the historical relationship between the component and the overall economy.

The index is reported as a single number, which represents the overall level of the LEI. A value above 100 indicates that the economy is likely to experience above-average economic growth in the coming months, while a value below 100 suggests below-average growth.

The LEI is considered a leading indicator because it provides insights into the future direction of the economy before it becomes evident in other economic data such as GDP growth or employment figures. By analyzing the LEI, economists, policymakers, and businesses can gain a better understanding of the current state of the economy and make more informed decisions regarding investment, hiring, and business strategies.

It is important to note that while the LEI is a valuable tool for economic forecasting, it is not infallible. Economic conditions can be influenced by a variety of factors, and unexpected events can disrupt economic trends. Therefore, it is always important to interpret the LEI in conjunction with other economic data and indicators to get a comprehensive view of the economy.

In summary, the Conference Board Leading Economic Index (LEI) is a composite index that uses a combination of economic data and indicators to forecast changes in economic activity. It is considered a leading indicator and provides valuable insights into the future direction of the economy. The LEI is widely used by economists, policymakers, and businesses to make informed decisions and understand the overall health of the economy.