Index of Leading Economic Indicators

Importance: ***

Definition: The index of leading economic indicators (LEI) is intended to predict future economic activity. Typically, three consecutive monthly LEI changes in the same direction suggest a turning point in the economy. For example, consecutive negative readings would indicate a possible recession.

Related Indicators: Lagging Index, Coincident Index

Source: Conference Board

Frequency: Monthly

Availability: Four to five weeks following the reported month

Direction: Procyclical

Timing: Leading indicator

Volatility: Low
Likely Impact of Financial Markets:

                    Interest Rates: The LEI has little impact on bond prices and interest rates

                    Stock Prices:  The LEI has little impact on stock prices

                    Exchange Rates: Same

Ability to Affect Markets: Small as most components of the index have been already published by the time the index is published

Analysis of the Indicator:
The index of leading economic indicators (LEI) is a composite of the following 11 leading indicators:
    Average workweek (manufacturing)
     Initial unemployment claims
     New orders for consumer goods
     Vendor performance
     Plant and equipment orders
     Building permits
     Change in unfilled durable orders
     Sensitive material prices
     Stock prices (S&P 500)
     Real M2
     Index of consumer expectations

While the LEI is an important forecasting tool, it has little impact on the bond market, because most
of its components are published prior to its release.

WEB Links

Conference Board Page on Leading Economic Indicators.